Interactive Brokers fails Risk Management 101

KCOJ said:
What does this imply … that IB thinks there is no risk associated with Currencies, Bonds, Agricultural products, Metals, Natural Gas etc etc … or is it all simply too hard so let’s just use a naïve 30% move measure to a couple of sectors and ignore the rest of the portfolio. Further not taking into account that the remainder of the client’s portfolio may contain assets that have some degree of negative correlation with equities thereby reducing risk levels.
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indeed.. IB has over-simplified margin calculation
they don't even bother if you have negative-correlated products in the same sector

given their size, IB should have a much better risk management system :confused:
 
craigr1 said:
I've been surprised by the Exposure Fee InteractiveBrokers imposes but found that it is often a very small percentage of the possible gain and that their margin requirements are less subjective and more reasonable than that which exists at other reputable brokers.
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Is this a typo, or do you think that the IB 'exposure fee' has anything at all to do with "possible gain"?
 
Zzzz1 said:
A lot of people are moaning about IB but so far none of them volunteered their new great brokers. Very telling.
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I already moved all my equity trading off them to ToS. I only do futures trading on IB because I live in Canada and there isn't much choice.
 
I think the fee is IB saying they really don't want these types of higher risk accounts.

They obviously know which products they are exposed to the most, so that list must be it.

FX products that the OP mention as an example probably don't pose so much of a risk based on what their clients are holding.

This is good for IB & other IB Customers who dont take so much overnight risk.
The highest risk customers will go elsewhere to avoid this fee.
 
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Agree fully while not denying that improvements can be had on IB's side in terms of estimating and measuring risk.

What a lot of the smaller players do not understand is the enormous impact one single high risk event can have on a financial institution. The mistake here is to look only through the own lenses and not considering the aggregate risk a broker may be exposed to. Even contracts like Eurobor do not move much in absolute terms, the aggregate net notional exposure for a broker may look very different.

southall said:
I think the fee is IB saying they really don't want these types of higher risk accounts.

They obviously know which products they are exposed to the most, so that list must be it.

FX client positions that you mention as an example probably don't pose so much of risk based on what their clients are holding.

This is all good for other Customers who dont take so much overnight risk.
These high risk customers will go elsewhere to avoid this fee.
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