Margin Rates - IB vs Schwab - 4x+?!

[kmiklas]

If my calculations are correct, Schwab is more than 4x IB.

June 21 2021 - Notional dollar amount: USD99,000

IB Rate charged: 1.6% (BM + 1.5%) [1]
Schwab rate charged: 6.875% [2]

What gives? Schwab is a solid broker... but 4.3x as much for a margin loan??

1. https://www.interactivebrokers.com/en/index.php?f=46376
2. https://www.schwab.com/margin/rates

 

[lwlee]

it’s not that Schwab is high, more the average. It’s that IB is very low. Compared it to other brokers and you will see

If my calculations are correct, Schwab is more than 4x IB.

June 21 2021 - Notional dollar amount: USD99,000

IB Rate charged: 1.6% (BM + 1.5%) [1]
Schwab rate charged: 6.875% [2]

What gives?

http://www.miklas.org/images/ib_rates.PNG
http://www.miklas.org/images/schwab_rates.PNG

1. https://www.interactivebrokers.com/en/index.php?f=46376
2. https://www.schwab.com/margin/rates

 

[kmiklas]

it’s not that Schwab is high, more the average. It’s that IB is very low. Compared it to other brokers and you will see

6-7% seems like a lot of money for a margin loan.

 

[guru]

No surprise here as this was always well known fact. IB was always x times lower than other large brokers and that’s one of their key competitive advantages.

 

[ajacobson]

Direct lender vs. borrowing at broker call and marking it up. IB is lending off its balance sheet - Schwab and most brokers borrow at broker call and mark it up. Which is better? Define your disaster. Institutional banks are usually cheaper than both.

 

[emulimu]

How do other things like commissions, interest given on cash balance, portfolio margin minimum balance etc compare besides the low margin loan interest which, btw, is awesome. I am looking to move from TD Ameritrade to IB. Thanks

 

[guru]

How do other things like commissions, interest given on cash balance, portfolio margin minimum balance etc compare besides the low margin loan interest which, btw, is awesome. I am looking to move from TD Ameritrade to IB. Thanks

They don't get paid for order flow so they do charge low fees, and you probably wouldn't be opening an account if you didn't already look at their fees, which is hard to miss on google.
But portfolio margin is horrible for people who utilize margin to its fullest, as IB is setting a lot of restrictions and margin requirements beyond what's actually at risk, and beyond any other broker. People continually swear at IB's notices about margin requirement increases. They'll also liquidate some of your positions instantly and sometimes without warning if you exceed margin requirements, while TDA may give you couple days.
I'd switch from IB to TDA just to get more standard leverage/margin, but I need IB's API and variety of order types, algos and routing. The cheap margin rates also help.

 

[deanstreet]

I'd switch from IB to TDA just to get more standard leverage/margin, but I need IB's API and variety of order types, algos and routing. The cheap margin rates also help.

Have you looked at TDA's API? Is it much weaker compared to IB?

 

[guru]

Have you looked at TDA's API? Is it much weaker compared to IB?

Yes, couldn’t do even half of what I do with IB’s API, like advanced order types, conditions, and routing. May take a look again in the future, but I remember spending two days just trying to figure out how to login. I cringe just thinking about going through that again, while I’ve seen people on Reddit saying they never got through that step, so can’t use TDA’s API at all. Also TDA’s recent acquisition doesn’t help in committing hundreds of hours to something that may not be supported or be totally different in the future.

IB’s API is outdated but wildly popular and known to be used by practically everyone developing algos and automated strategies.

 

[deanstreet]

IB’s API is outdated but wildly popular and known to be used by practically everyone developing algos and automated strategies.

Have you looked at other software APIs such as Sterling, Realtick, etc? I never myself, just trying to piggyback your experience.