Interactive Brokers and Automatic Liquidation policy for cash / registered / non-taxable accounts

[andrew black]

Interesting details on a Canadian forum http://forums.redflagdeals.com/beware-interactive-brokers-margin-call-rrsp-2254541/

Today I got an interesting alert from IB, that I had a "Liquidation Warning" aka a Margin Call... on my RRSP.

This couldn't be right, I thought, so I looked at my stocks and sure enough, they sold 100 shares of one of them, and what a coincidence, at the lowest price of the day to the penny.

The position was liquidated at minimum of the day. I am curious how legal can this be.

 

[guru]

Interesting details on a Canadian forum http://forums.redflagdeals.com/beware-interactive-brokers-margin-call-rrsp-2254541/



The position was liquidated at minimum of the day. I am curious how legal can this be.

IB was sued in the past for improper liquidation. Though I’d assume it forced them to improve the processes, and I believe they do it more gradually now, and in better ways than just market orders.
One explanation could be that the margin became worst at the time when the stock price became worse, but I don’t understand why this needed to be done in cash account, if that still applies to this example.
This example may also need checking how liquid was the stock.

 

[murray t turtle]

Where they are now encouraging SUB 1 SHARE trading, why would the system be set up this way ?

At the very least , there should be some serious lag in doing this, and for sub $100 amounts, zero exposure for the billion dollar baby.

%%
Even though I mentioned that subshare stuff , to avoid liquidating $40,000 was the example used here. But the apple seller gets a better deal for 100 apples rather than 1. So with low or no commissions, they have to make money somewhere; I traded a no fee ETF last year. BUT you had to keep it /Wisdom Tree/30 days LOL..................................................................................It was not HI volume; so buyer beware.LOL

 

[jtrader33]

IB recalculates margin overnight and sometimes I get to negative overnight, especially with options where some may be expiring. My experience has taught me to try to close my positions by myself as soon as margin gets negative or the market opens. Otherwise IB simply doesn't know which of your positions/stocks/options you'd like to exit, so it may liquidate random positions, or those that they determine would be best to resolve the problem. Recently they closed one leg of my put spread, unrelated to other positions I opened that ate my margin, so I had one put option still open in the morning and spent hours trying to figure out how I ended up with that put, even though it made money after all. I didn't see any fault on IB end though, maybe except unclear margin calculations that often I cannot explain.

You’re not given any notice via email, etc.? Even after the fact?

 

[guru]

You’re not given any notice via email, etc.? Even after the fact?

You’d get email notifications about trades made (if you configure it so), after the fact.
In the past, with more serious margin violations I was receiving several warnings on my phone but that was a while back, while I don’t remember receiving any warnings recently for “minor” violations, although IB still acted and made trades on my behalf.
Not sure if recently I didn’t see notifications because they were more minor margin violations or because something got misconfigured in my account or app. I think IB has changed how their email & desktop alerts work and I had to configure them again recently, so basically not sure if that was the problem, or IB simply didn’t provide alerts for my recent margin violation.