IB's margin requirements for futures are higher than those of the exchanges. For example, right now the Globex initial margin for ES is $4,758 while IB's is $5,406.25.
However, this is a quote from IB's Web site:
"Margin Calculations for Commodities
"Your Universal Account has two account segments: one for securities and one for commodities (futures, single-stock futures and futures options). Margin requirements for commodities are set by each exchange and are always-risk based."
And on another page:
"The table below depicts the exchange margin requirements."
Then that table goes on to list margin requirements that are higher.
And on another page:
"The Time of Trade Initial Margin calculation for commodities is pictured below. The initial margin used in this calculation is set by the individual exchanges and listed on the Futures & FOPs Margin page."
And there are other, similar statements on other pages of the site. I'm guessing that at some point in the past IB required only exchange margins and thus the legacy wording.
There are two obvious problems here. First, there's the less-than-accurate site information. Then there's the issue of the exchange routinely raising margin levels during higher volatility periods, combined with the potential (likelihood?) of IB also raising their margins at the same time by an indeterminate amount.
I am accustomed to the CME's longstanding policies on margin increases and can maintain sufficient funds in my account to allow for that and avoid forced liquidation. (And the exchange has a long history of changes in margin requirements.) But if something happens how do I plan for IB's additional margin which can go up by an unstated amount above that? In my experience, the CME provides at least 24 hoursâ notice before implementing margin changes in order to give market participants time to assess the impact on their position and make arrangements for funding. But with IB, would there be any prior notice at all, giving people at least a chance to wire in additional funds, or would the margin requirements suddenly just jump up to who-knows-what level and your positions instantly liquidated?
So right now we have two separate entities using proprietary formulae dynamically changing margin requirements. One is enough.
Now don't get me wrong; if IB were to simply state outright that they are going to routinely charge, say, 15 percent higher margins than the exchanges with prior notice, then I would know what to do and I would have no problem with that. But they need to state that explicitly. And they definitely do not do that.
Better yet, why not just use the exchange margins as other brokers do? And anyone was bold enough to not have their stops in and who then falls below the exchange maintenance margin level can, and should, be liquidated. Everyone is familiar with and can plan for that; and isn't that a better way? Surely IB's systems can handle that with aplomb, no?
However, this is a quote from IB's Web site:
"Margin Calculations for Commodities
"Your Universal Account has two account segments: one for securities and one for commodities (futures, single-stock futures and futures options). Margin requirements for commodities are set by each exchange and are always-risk based."
And on another page:
"The table below depicts the exchange margin requirements."
Then that table goes on to list margin requirements that are higher.
And on another page:
"The Time of Trade Initial Margin calculation for commodities is pictured below. The initial margin used in this calculation is set by the individual exchanges and listed on the Futures & FOPs Margin page."
And there are other, similar statements on other pages of the site. I'm guessing that at some point in the past IB required only exchange margins and thus the legacy wording.
There are two obvious problems here. First, there's the less-than-accurate site information. Then there's the issue of the exchange routinely raising margin levels during higher volatility periods, combined with the potential (likelihood?) of IB also raising their margins at the same time by an indeterminate amount.
I am accustomed to the CME's longstanding policies on margin increases and can maintain sufficient funds in my account to allow for that and avoid forced liquidation. (And the exchange has a long history of changes in margin requirements.) But if something happens how do I plan for IB's additional margin which can go up by an unstated amount above that? In my experience, the CME provides at least 24 hoursâ notice before implementing margin changes in order to give market participants time to assess the impact on their position and make arrangements for funding. But with IB, would there be any prior notice at all, giving people at least a chance to wire in additional funds, or would the margin requirements suddenly just jump up to who-knows-what level and your positions instantly liquidated?
So right now we have two separate entities using proprietary formulae dynamically changing margin requirements. One is enough.
Now don't get me wrong; if IB were to simply state outright that they are going to routinely charge, say, 15 percent higher margins than the exchanges with prior notice, then I would know what to do and I would have no problem with that. But they need to state that explicitly. And they definitely do not do that.
Better yet, why not just use the exchange margins as other brokers do? And anyone was bold enough to not have their stops in and who then falls below the exchange maintenance margin level can, and should, be liquidated. Everyone is familiar with and can plan for that; and isn't that a better way? Surely IB's systems can handle that with aplomb, no?
