Interactive Brokers (Best Kept Secret)

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
mike999
Posts: 11
Joined: Sat May 09, 2020 1:30 pm

Re: Interactive Brokers (Best Kept Secret)

Post by mike999 »

B00st wrote: Fri Jan 29, 2021 7:32 pm Interactive Brokers (as well as many other small brokers) didn't have the capital to support the trades in these stocks due to DTCC raising the collateral rates from the normal 1-3% to 100%. Given that GME was $300+ per share and had massive trading volume, they could not afford to send 100% to DTCC and have it sit for two days while the funds settled. They allowed people to sell, because selling doesn't require capital.
Why can't they afford to send 100% collateral if they put the margin requirement already to 100%? IB also said they had no issues in that regard. And if they still had issues why wouldn't they explain or mention it?
talzara
Posts: 4745
Joined: Thu Feb 12, 2009 6:40 pm

Re: Interactive Brokers (Best Kept Secret

Post by talzara »

ChrisBenn wrote: Fri Jan 29, 2021 5:25 pm For the case of a person buying shares (not selling short):
In all of those scenarios if the shares were not delivered then the cash would be returned also though? If a trade fails to execute due to a counterparty reneging prior to settlement IB would just put the cash back in ones account - not be on the hook to scour other markets for the share? That is the whole purpose of the settlement window?
The trade does not fail to execute. It has already executed. The problem is that the shares may not be delivered.

If there is a failure to deliver, the shorting broker would have to buy shares for delivery. If the price goes too high, the shorting broker could go bankrupt. The buying broker would then have to buy replacement shares. If it busts the trade, then the mess will end up in the courts.

The purpose of the settlement window is to allow the selling broker to put together the shares for delivery. It used to be necessary because they had to find the paper stock certificates. It's still necessary for short sales, since the broker has to borrow the shares.
ChrisBenn wrote: Fri Jan 29, 2021 5:25 pm IB is still loaning out GME to short -- https://iborrowdesk.com/report/GME. -- if they can't trust a stock straight purchased to be delivered why can they trust shorted stocks to be returned?
It is not.

These are shares that IB will borrow for its customers, not shares that IB will lend out to other brokers. The counterparty risk runs the other way.

Also, your link shows that shares were last available to borrow at 2021-01-27 16:45:03. They haven't been available to borrow for two days. Compare that to TSLA, which still had shares available to borrow at 2021-01-29 16:45:03: https://iborrowdesk.com/report/tsla
alex_686
Posts: 13320
Joined: Mon Feb 09, 2015 1:39 pm

Re: Interactive Brokers (Best Kept Secret)

Post by alex_686 »

mike999 wrote: Sat Jan 30, 2021 3:21 am
B00st wrote: Fri Jan 29, 2021 7:32 pm Interactive Brokers (as well as many other small brokers) didn't have the capital to support the trades in these stocks due to DTCC raising the collateral rates from the normal 1-3% to 100%. Given that GME was $300+ per share and had massive trading volume, they could not afford to send 100% to DTCC and have it sit for two days while the funds settled. They allowed people to sell, because selling doesn't require capital.
Why can't they afford to send 100% collateral if they put the margin requirement already to 100%? IB also said they had no issues in that regard. And if they still had issues why wouldn't they explain or mention it?
Well, it is may actually be 400% collateral.

The collateral that you are talking about is sitting in the client’s account. They won’t have access to that for T+2 days.

When IB puts in a trade they have to post enough variance collateral to make the other side whole if they can’t complete the trade. Normally this is a small fraction of the trade. No biggie. However the variance collateral is based on volatility, and that has gone through the roof. i.e., what if you sold at $300 on Friday, failed to deliver, and GSE was trading at $4,000. I have seen some calculations suggesting it might be as high as 400%.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
talzara
Posts: 4745
Joined: Thu Feb 12, 2009 6:40 pm

Re: Interactive Brokers (Best Kept Secret)

Post by talzara »

Steve Reading wrote: Fri Jan 29, 2021 6:43 pm Makes a lot of sense. One more Q. If an IBKR client buys stock, which ultimately came from a short sale, leading to a failure-to-deliver, which broker is on the hook for it? If the stock rose in value (which means it must be purchased for more than IBKR's client paid for), who takes that loss?
The shorting broker has to deliver the stock, so it has to buy the stock at any price. This is why the shorting broker may go bankrupt if the price rises too much.
talzara
Posts: 4745
Joined: Thu Feb 12, 2009 6:40 pm

Re: Interactive Brokers (Best Kept Secret)

Post by talzara »

mike999 wrote: Fri Jan 29, 2021 6:50 pm
talzara wrote: Fri Jan 29, 2021 1:52 pm No. Clearinghouses exist to simplify the settlement process.
You are saying clearing houses aren't there to reduce/remove the risk for the two parties but are only there to simplify the trade?
Yes.

The clearinghouse does reduce risk by requiring collateral, but brokers could get the same risk reduction by requiring collateral at the time the trade is made. Then you'd have an even bigger mess.

The clearinghouse nets out all the trades, so each broker only needs enough collateral with the clearinghouse to support its net trades plus a margin of safety.
ChrisBenn
Posts: 461
Joined: Mon Aug 05, 2019 7:56 pm

Re: Interactive Brokers (Best Kept Secret

Post by ChrisBenn »

talzara wrote: Sat Jan 30, 2021 2:56 pm
ChrisBenn wrote: Fri Jan 29, 2021 5:25 pm For the case of a person buying shares (not selling short):
In all of those scenarios if the shares were not delivered then the cash would be returned also though? If a trade fails to execute due to a counterparty reneging prior to settlement IB would just put the cash back in ones account - not be on the hook to scour other markets for the share? That is the whole purpose of the settlement window?
The trade does not fail to execute. It has already executed. The problem is that the shares may not be delivered.

If there is a failure to deliver, the shorting broker would have to buy shares for delivery. If the price goes too high, the shorting broker could go bankrupt. The buying broker would then have to buy replacement shares. If it busts the trade, then the mess will end up in the courts.

The purpose of the settlement window is to allow the selling broker to put together the shares for delivery. It used to be necessary because they had to find the paper stock certificates. It's still necessary for short sales, since the broker has to borrow the shares.
Gotcha, I think. I did try and parse through https://www.sec.gov/investor/pubs/regsho.htm but didn't see anything that seemed to obligate the purchasing broker to deliver the share, only the selling broker. But from your comment "will end up in courts" I'm guessing it's a civil issue/liability (as opposed to regulatory), and acknowledged, I can see the risk there.

Thanks for walking through that with me!
mike999
Posts: 11
Joined: Sat May 09, 2020 1:30 pm

Re: Interactive Brokers (Best Kept Secret)

Post by mike999 »

alex_686 wrote: Sat Jan 30, 2021 3:07 pm Well, it is may actually be 400% collateral.

The collateral that you are talking about is sitting in the client’s account. They won’t have access to that for T+2 days.

When IB puts in a trade they have to post enough variance collateral to make the other side whole if they can’t complete the trade. Normally this is a small fraction of the trade. No biggie. However the variance collateral is based on volatility, and that has gone through the roof.
If someone like RH did require more capital that's one thing but IB said themself they didn't have that kind of issue.
i.e., what if you sold at $300 on Friday, failed to deliver, and GSE was trading at $4,000. I have seen some calculations suggesting it might be as high as 400%.
It's not about selling. They didn't allow to buy even with 100% cash. Not talking about options or similar here. Just the most basic buying a of a simple stock with 100% collateral which wasn't possible.
User avatar
oldcomputerguy
Moderator
Posts: 17934
Joined: Sun Nov 22, 2015 5:50 am
Location: Tennessee

Re: Interactive Brokers (Best Kept Secret)

Post by oldcomputerguy »

A couple of posts linking to Reddit were removed. The linked post contained offensive language in violation of BH forum policy. As LadyGeek wrote:
LadyGeek wrote: Fri Jan 29, 2021 6:56 am Linking to a website brings that discussion into the forum. Please avoid linking to reddit due to language above our "family friendly" threshold. The content also tends to derail the discussion held here.

FYI - As noted here, there is a Bogleheads subreddit /r/Bogleheads. There is absolutely no, zero, zip, nada connection with this forum. I'm just pointing it out as a place for reddit style comments.
There is only one success - to be able to spend your life in your own way. (Christopher Morley)
the way
Posts: 439
Joined: Sat Oct 26, 2019 6:00 pm

Re: Interactive Brokers (Best Kept Secret)

Post by the way »

talzara wrote: Fri Jan 29, 2021 2:21 pm
the way wrote: Fri Jan 29, 2021 1:47 pm Here's an interview with a different brokerage CEO trying to explain why they shut down those stocks. Basically he says he was told by the Clearing houses to do it. https://finance.yahoo.com/video/heres-w ... 49721.html

ANTHONY DENIER: "Well, it wasn't our choice. Our clearing firm gave us a call and said we're going to have to stop allowing new opening positions in the three names, AMC, GME, and KOSS" because "they simply can't afford the cost of that trade clearance."
Increasing the margin on short positions to 300% causes more margin calls on short-sellers, not less. IB can only control its own margin policies. It cannot control what other brokers do.

Anthony Denier did not say that the clearinghouses told him to restrict trading. A clearing firm is not a clearinghouse.

Also, Interactive Brokers is self-clearing. It does not use a clearing firm.
the way wrote: Fri Jan 29, 2021 1:47 pm Also, TD announced restrictions which are a lot more reasonable and basically what I was saying (require settled funds, no uncovered option writing, etc). You have to wonder why they don't have to worry about the "other side" not making good if what you say is right. https://www.tdameritrade.com/td-ameritr ... tocks.page
Interactive Brokers has always had stricter risk-management controls than TD Ameritrade.
After 3 days the CEOs finally converged on the same explanation I posted from the WeBull CEO. IB and RH's initial explanation of a vague "to protect the customer" just sounded like bull which is why no one believed it. It was a Clearinghouse cash collateral issue and not a short selling stock delivery worry. Also, I don't know if TD has less strict risk-management controls or not, but it sounds like they simply didn't have the concentration/proportion of trades in these meme stocks that the others had, so weren't affected as badly by the collateral requirements boost. https://nypost.com/2021/02/01/elon-musk ... stop-saga/
talzara
Posts: 4745
Joined: Thu Feb 12, 2009 6:40 pm

Re: Interactive Brokers (Best Kept Secret)

Post by talzara »

the way wrote: Mon Feb 01, 2021 2:54 pm After 3 days the CEOs finally converged on the same explanation I posted from the WeBull CEO. IB and RH's initial explanation of a vague "to protect the customer" just sounded like bull which is why no one believed it. It was a Clearinghouse cash collateral issue and not a short selling stock delivery worry. Also, I don't know if TD has less strict risk-management controls or not, but it sounds like they simply didn't have the concentration/proportion of trades in these meme stocks that the others had, so weren't affected as badly by the collateral requirements boost. https://nypost.com/2021/02/01/elon-musk ... stop-saga/
That is a link to an article about Robinhood. This thread is about Interactive Brokers, a company with $9 billion of capital.

Clearinghouses demand collateral to guarantee that the trade will settle. If the brokerage fails to deliver the shares, the clearinghouse can use the collateral posted by the failing firm to buy replacement shares.

Peterffy said that his customers were 5% of the GME trade. 5% of $16 billion is $800 million. It'll be even less after Interactive Brokers liquidated the customers who failed to meet margin. Interactive Brokers was never at risk of failing to deliver. Interactive Brokers was at risk from other firms failing to deliver -- firms like Robinhood.
SlowMovingInvestor
Posts: 3487
Joined: Sun Sep 11, 2016 11:27 am

Re: Interactive Brokers (Best Kept Secret)

Post by SlowMovingInvestor »

I was thinking of playing around a little bit with futures at Interactive. Mostly for paper trading with their API.

Do you need to subscribe to one of their data feeds to get Futures prices (delayed) ? I'm an Interactive Broker Pro customer. It's probably a minor amount of money, but this is just a bit of hobby programming for me right now so I'd rather not spend money I don't have to.
xerxes101
Posts: 534
Joined: Sat Oct 14, 2017 11:25 am

Re: Interactive Brokers (Best Kept Secret)

Post by xerxes101 »

the way wrote: Mon Feb 01, 2021 2:54 pm
After 3 days the CEOs finally converged on the same explanation I posted from the WeBull CEO. IB and RH's initial explanation of a vague "to protect the customer" just sounded like bull which is why no one believed it. It was a Clearinghouse cash collateral issue and not a short selling stock delivery worry. Also, I don't know if TD has less strict risk-management controls or not, but it sounds like they simply didn't have the concentration/proportion of trades in these meme stocks that the others had, so weren't affected as badly by the collateral requirements boost. https://nypost.com/2021/02/01/elon-musk ... stop-saga/
Thanks for posting that artilce. I found it interesting. I have a separate but perhaps related question. As far as you know, why is it that brokerage houses restrict you from putting certain limit orders? The other day I was trying to put a $35 limit order for a stock that was trading at $8 and Schwab did not let me do this, i.e. the order was rejected (I will report back about IBKR soon)...So my question is this: Who is Schwab really trying to protect by not allowing me to put this limit order? I don't want to spend my whole day behind the computer and I feel that the stock is volatile enough that it could reach that price (esp. these days). Are they in the business of making sure I don't get rich too quickly :shock: what are they really doing? ...honestly it is both ridiculous and ludicrous as far as I am concerned...I feel so strongly about this that I am thinking about pulling my assets out of any broker that does this... :annoyed...interested in your thoughts.
User avatar
beyou
Posts: 6915
Joined: Sat Feb 27, 2010 2:57 pm
Location: If you can make it there

Re: Interactive Brokers (Best Kept Secret)

Post by beyou »

With IBKR can you combine multiple accounts to a single login ?
I have taxable and 2 IRA, spouse has 2 IRA, total 5 accounts.
Can I see them all in one login and trade any of them ?

Additionally is there anything that helps you drill into the portfolio characteristics similar to M* X-ray or Vanguard Portfolio Watch ?
occambogle
Posts: 953
Joined: Thu Dec 12, 2019 3:58 am

Re: Interactive Brokers (Best Kept Secret)

Post by occambogle »

beyou wrote: Sat Feb 06, 2021 10:14 am With IBKR can you combine multiple accounts to a single login ?
I have taxable and 2 IRA, spouse has 2 IRA, total 5 accounts.
Can I see them all in one login and trade any of them ?
You can certainly link multiple accounts from the same owner to a single login so they both show in the same interface. I don't know whether, or not, you could link between accounts of two people.
beyou wrote: Sat Feb 06, 2021 10:14 am Additionally is there anything that helps you drill into the portfolio characteristics similar to M* X-ray or Vanguard Portfolio Watch ?
Yes they have a tool called PortfolioAnalyst that does this...
User avatar
beyou
Posts: 6915
Joined: Sat Feb 27, 2010 2:57 pm
Location: If you can make it there

Re: Interactive Brokers (Best Kept Secret)

Post by beyou »

occambogle wrote: Sat Feb 06, 2021 10:27 am
beyou wrote: Sat Feb 06, 2021 10:14 am With IBKR can you combine multiple accounts to a single login ?
I have taxable and 2 IRA, spouse has 2 IRA, total 5 accounts.
Can I see them all in one login and trade any of them ?
You can certainly link multiple accounts from the same owner to a single login so they both show in the same interface. I don't know whether, or not, you could link between accounts of two people.
beyou wrote: Sat Feb 06, 2021 10:14 am Additionally is there anything that helps you drill into the portfolio characteristics similar to M* X-ray or Vanguard Portfolio Watch ?
Yes they have a tool called PortfolioAnalyst that does this...
Just found Portfolio analyst, and note non-clients of IBKR can signup and and use most of the functionality, though the site is nor working now, was under “planned maintenance” Saturday noon ET. It let me create a login, but when prompted to enter a manual portfolio, could not save it, then later found login prompt warning of possible downtime.
bling
Posts: 1457
Joined: Sat Jan 21, 2012 11:49 am

Re: Interactive Brokers (Best Kept Secret)

Post by bling »

beyou wrote: Sat Feb 06, 2021 11:33 am Just found Portfolio analyst, and note non-clients of IBKR can signup and and use most of the functionality, though the site is nor working now, was under “planned maintenance” Saturday noon ET. It let me create a login, but when prompted to enter a manual portfolio, could not save it, then later found login prompt warning of possible downtime.
it's pretty brutal. i've never dealt with any company/service that has so many scheduled outages on weekends.
mike999
Posts: 11
Joined: Sat May 09, 2020 1:30 pm

Re: Interactive Brokers (Best Kept Secret)

Post by mike999 »

the way wrote: Mon Feb 01, 2021 2:54 pm After 3 days the CEOs finally converged on the same explanation I posted from the WeBull CEO. IB and RH's initial explanation of a vague "to protect the customer" just sounded like bull which is why no one believed it. It was a Clearinghouse cash collateral issue and not a short selling stock delivery worry. Also, I don't know if TD has less strict risk-management controls or not, but it sounds like they simply didn't have the concentration/proportion of trades in these meme stocks that the others had, so weren't affected as badly by the collateral requirements boost. https://nypost.com/2021/02/01/elon-musk ... stop-saga/
Can you link where IB changed their explanation or what is the source for this in regards of IB?
IB early on said they didn't have any issues with cash for collaterals in connection with this and cash not being the reason in their case.
User avatar
beyou
Posts: 6915
Joined: Sat Feb 27, 2010 2:57 pm
Location: If you can make it there

Re: Interactive Brokers (Best Kept Secret)

Post by beyou »

bling wrote: Sat Feb 06, 2021 1:09 pm
beyou wrote: Sat Feb 06, 2021 11:33 am Just found Portfolio analyst, and note non-clients of IBKR can signup and and use most of the functionality, though the site is nor working now, was under “planned maintenance” Saturday noon ET. It let me create a login, but when prompted to enter a manual portfolio, could not save it, then later found login prompt warning of possible downtime.
it's pretty brutal. i've never dealt with any company/service that has so many scheduled outages on weekends.
I have to choose between no phone support on weekends (Vanguard) and no website on weekends (IBKR) I'll take Vanguard.
Rarely would call but I would think lots of busy clients need to login on the weekend.
Tanelorn
Posts: 2370
Joined: Thu May 01, 2014 9:35 pm

Re: Interactive Brokers (Best Kept Secret)

Post by Tanelorn »

beyou wrote: Sat Feb 06, 2021 2:35 pm
bling wrote: Sat Feb 06, 2021 1:09 pm it's pretty brutal. i've never dealt with any company/service that has so many scheduled outages on weekends.
I have to choose between no phone support on weekends (Vanguard) and no website on weekends (IBKR) I'll take Vanguard.
Rarely would call but I would think lots of busy clients need to login on the weekend.
For people who trade actively, the typical IB client, they would much rather have the platform working during the market hours and not worry about weekend support. Vanguard and many other brokers’ sites were very slow and or unresponsive during a few of the very high volume days in the past couple weeks. What’s that worth when you’re trading GME? Could easily be a lot, either way.
Incompetent
Posts: 4
Joined: Fri Feb 12, 2021 2:13 am

Re: Interactive Brokers (Best Kept Secret)

Post by Incompetent »

Hello all,

Quick question on the reporting in IBKR, with respect to foreign currency purchases:

Image

In the above image, does the MTM IN CAD amount of -1.84 represent the difference in exchange rates between the day of purchase and the settlement date?
User avatar
Raraculus
Posts: 339
Joined: Sat Jul 20, 2019 10:43 am

Re: Interactive Brokers (Best Kept Secret)

Post by Raraculus »

Raraculus wrote: Thu Sep 17, 2020 6:10 pmSecurities purchased on margin has tax deductible interest. Securities purchased on margin can gain/lose in value. Securities purchased on margin can receive dividends.
I'm doing my taxes and have come upon a realization - the margin interest is tax deductible, but it is an itemized deduction. :oops: For all intent and purposes, margin interest is NOT easily deducted for personal income taxes. Well, that small 2020 experiment in using margin solely for my investments is now over. :D

I will still explore the possibility of using margin loans to pay off CC's as their 0% promo APR's expire. This should help manage my cash flow. And as a bonus, I am not prematurely selling securities just to pay off expiring CC's. LTCG for the win!
bling
Posts: 1457
Joined: Sat Jan 21, 2012 11:49 am

Re: Interactive Brokers (Best Kept Secret)

Post by bling »

Raraculus wrote: Mon Feb 15, 2021 6:45 pm
Raraculus wrote: Thu Sep 17, 2020 6:10 pmSecurities purchased on margin has tax deductible interest. Securities purchased on margin can gain/lose in value. Securities purchased on margin can receive dividends.
I'm doing my taxes and have come upon a realization - the margin interest is tax deductible, but it is an itemized deduction. :oops: For all intent and purposes, margin interest is NOT easily deducted for personal income taxes. Well, that small 2020 experiment in using margin solely for my investments is now over. :D
well, obviously the answer is to borrow enough to exceed the standard deduction. :twisted:
SlowMovingInvestor
Posts: 3487
Joined: Sun Sep 11, 2016 11:27 am

Re: Interactive Brokers (Best Kept Secret)

Post by SlowMovingInvestor »

I see a lot of foreign exchanges that IB gives access to (135 total, including the US), and one can trade stocks on some of them.

Questions:

1) for US based investors, assuming one is not trading foreign ETFs (PFICs), are there any extra reporting requirements when one trades stocks/options on foreign exchanges ? Will IB generate 1099s for any trading and foreign tax credit etc. ?

2) I also see that some exchanges are listed in IB's list of exchanges supported, but seem in accessible when one asks for trading permissions. India's exchange for instance. Are those just restricted for US persons because of FATCA or because of local regulations and ownership regulations ?
Neus
Posts: 496
Joined: Fri Sep 22, 2017 2:12 am
Location: a Developing country in Asia with Low Cost of Living and Tax Treaty with USA

Re: Interactive Brokers (Best Kept Secret)

Post by Neus »

I got this confusing email that my cash balance is not enough

I have 56 usd in cash
Have no option or futures, long only
Investment amount above 100.000 which should waive me from $10 usd monthly fee

How much is the ideal amount to be left in cash at ibkr?

Dear Client,

This is a reminder that the cash balance in your account *****, while positive, is at a level which might not be adequate to cover possible fees and/or deductions. Please note that if your account is assessed a fee or incurs a deduction that exceeds your cash balance, your positions will be subject to forced liquidation to satisfy any resultant deficit.

Examples of common fees and deductions which "Cash" type accounts might incur include the following:

Assessment of an IBKR Pro account monthly minimum activity fee;
Assessment of a market data subscription fee;
ADR Custody fees;
Exercise of a long call option resulting in the delivery of stock without sufficient cash to pay for the stock in full;
Exercise of a long put option resulting in the delivery of a short stock position which cannot be offset by an existing long position; or
Variation margin on a futures contract.

Since a "Cash" type account (or a "Margin" type account with a balance below 2,000 USD) does not allow us to lend you funds to satisfy a cash deficiency, we encourage you to closely monitor your cash balance and consider depositing additional funds to avoid any forced liquidation of your positions.
Interactive Brokers Client Services
Last edited by Neus on Wed Mar 10, 2021 8:59 pm, edited 1 time in total.
Remember Rule 5: Never try to time the market. Two common timing mistakes: buying yesterday's top performers, and letting your emotions cause you to attempt to predict the direction of the stock market.
User avatar
Steve Reading
Posts: 2959
Joined: Fri Nov 16, 2018 9:20 pm

Re: Interactive Brokers (Best Kept Secret)

Post by Steve Reading »

Neus wrote: Wed Mar 10, 2021 8:25 pm I got this confusing email that my cash balance is not enough

I have 56 usd in cash
Have no option or futures, long only
Investment amount above 100.000 which should waive me from $10 usd monthly fee

Dear Client,

This is a reminder that the cash balance in your account ***, while positive, is at a level which might not be adequate to cover possible fees and/or deductions. Please note that if your account is assessed a fee or incurs a deduction that exceeds your cash balance, your positions will be subject to forced liquidation to satisfy any resultant deficit.

Examples of common fees and deductions which "Cash" type accounts might incur include the following:

Assessment of an IBKR Pro account monthly minimum activity fee;
Assessment of a market data subscription fee;
ADR Custody fees;
Exercise of a long call option resulting in the delivery of stock without sufficient cash to pay for the stock in full;
Exercise of a long put option resulting in the delivery of a short stock position which cannot be offset by an existing long position; or
Variation margin on a futures contract.

Since a "Cash" type account (or a "Margin" type account with a balance below 2,000 USD) does not allow us to lend you funds to satisfy a cash deficiency, we encourage you to closely monitor your cash balance and consider depositing additional funds to avoid any forced liquidation of your positions.
Interactive Brokers Client Services
Sounds like an automated email sent to any cash accounts when their cash holdings are below some threshold? You could message them and ask.
Last edited by Steve Reading on Wed Mar 10, 2021 9:02 pm, edited 1 time in total.
"... so high a present discounted value of wealth, it is only prudent for him to put more into common stocks compared to his present tangible wealth, borrowing if necessary" - Paul Samuelson
Neus
Posts: 496
Joined: Fri Sep 22, 2017 2:12 am
Location: a Developing country in Asia with Low Cost of Living and Tax Treaty with USA

Re: Interactive Brokers (Best Kept Secret)

Post by Neus »

Steve Reading wrote: Wed Mar 10, 2021 8:29 pm
Neus wrote: Wed Mar 10, 2021 8:25 pm I got this confusing email that my cash balance is not enough

I have 56 usd in cash
Have no option or futures, long only
Investment amount above 100.000 which should waive me from $10 usd monthly fee

Dear Client,

This is a reminder that the cash balance in your account *******, while positive, is at a level which might not be adequate to cover possible fees and/or deductions. Please note that if your account is assessed a fee or incurs a deduction that exceeds your cash balance, your positions will be subject to forced liquidation to satisfy any resultant deficit.

Examples of common fees and deductions which "Cash" type accounts might incur include the following:

Assessment of an IBKR Pro account monthly minimum activity fee;
Assessment of a market data subscription fee;
ADR Custody fees;
Exercise of a long call option resulting in the delivery of stock without sufficient cash to pay for the stock in full;
Exercise of a long put option resulting in the delivery of a short stock position which cannot be offset by an existing long position; or
Variation margin on a futures contract.

Since a "Cash" type account (or a "Margin" type account with a balance below 2,000 USD) does not allow us to lend you funds to satisfy a cash deficiency, we encourage you to closely monitor your cash balance and consider depositing additional funds to avoid any forced liquidation of your positions.
Interactive Brokers Client Services
Sounds like an automated email sent to any cash accounts when their cash holdings are below some threshold? You could message them and ask.
Already msg-ed them, but usually they reply in a few days

I always have low amount of cash, sometimes near 0, but this is the first time i got this kind of email

Let's say they liquidate my equity to pay the fees, do they liquidate a few (just as needed), or all of my position?
Last edited by Neus on Wed Mar 10, 2021 9:10 pm, edited 1 time in total.
Remember Rule 5: Never try to time the market. Two common timing mistakes: buying yesterday's top performers, and letting your emotions cause you to attempt to predict the direction of the stock market.
User avatar
Steve Reading
Posts: 2959
Joined: Fri Nov 16, 2018 9:20 pm

Re: Interactive Brokers (Best Kept Secret)

Post by Steve Reading »

Neus wrote: Wed Mar 10, 2021 8:58 pm
Steve Reading wrote: Wed Mar 10, 2021 8:29 pm
Neus wrote: Wed Mar 10, 2021 8:25 pm I got this confusing email that my cash balance is not enough

I have 56 usd in cash
Have no option or futures, long only
Investment amount above 100.000 which should waive me from $10 usd monthly fee

Dear Client,

This is a reminder that the cash balance in your account ****, while positive, is at a level which might not be adequate to cover possible fees and/or deductions. Please note that if your account is assessed a fee or incurs a deduction that exceeds your cash balance, your positions will be subject to forced liquidation to satisfy any resultant deficit.

Examples of common fees and deductions which "Cash" type accounts might incur include the following:

Assessment of an IBKR Pro account monthly minimum activity fee;
Assessment of a market data subscription fee;
ADR Custody fees;
Exercise of a long call option resulting in the delivery of stock without sufficient cash to pay for the stock in full;
Exercise of a long put option resulting in the delivery of a short stock position which cannot be offset by an existing long position; or
Variation margin on a futures contract.

Since a "Cash" type account (or a "Margin" type account with a balance below 2,000 USD) does not allow us to lend you funds to satisfy a cash deficiency, we encourage you to closely monitor your cash balance and consider depositing additional funds to avoid any forced liquidation of your positions.
Interactive Brokers Client Services
Sounds like an automated email sent to any cash accounts when their cash holdings are below some threshold? You could message them and ask.
Already msg-ed them, but usually they reply in a few days

I always have low amount of cash, sometimes near 0, but this is the first time i got this kind of email

Let's say they liquidate my equity to pay the fees, do they liquidate a few (just as needed), or all of my position?
Only whatever is needed to cover the cash deficiency. Let us know what they respond, I'm curious!
"... so high a present discounted value of wealth, it is only prudent for him to put more into common stocks compared to his present tangible wealth, borrowing if necessary" - Paul Samuelson
Tanelorn
Posts: 2370
Joined: Thu May 01, 2014 9:35 pm

Re: Interactive Brokers (Best Kept Secret)

Post by Tanelorn »

Neus wrote: Wed Mar 10, 2021 8:25 pm I got this confusing email that my cash balance is not enough...

Since a "Cash" type account (or a "Margin" type account with a balance below 2,000 USD) does not allow us to lend you funds to satisfy a cash deficiency, we encourage you to closely monitor your cash balance and consider depositing additional funds to avoid any forced liquidation of your positions. -Interactive Brokers Client Services
I’m not sure what you’re confused about. IB charges fees for various things and they’re just warning you that IF one of those things comes up, from the list of possibilities in the email, you might end up with a negative cash balance if the charges were more than the $50 you’ve got to pay them. Read the part above for how, since you don’t have a margin account to borrow to cover that possible deficit, if you do end up with a negative cash situation they will sell some of your positions automatically to cover it. If all you hold is stock, this will likely be handled very well, there’s no charge, they tend to get reasonable prices, and they only sell as much or maybe a little more to cover the negative balance.

If you’ve got options in your account or very highly appreciated stock where you don’t want to sell for tax reasons, you might double check you’re not going to trigger any of those things that might incur a fee. Options liquidations are much more dicey, bad spreads, and margin rules can sometimes be such that selling an option could increase your risk and lead to more sales. Regarding appreciated positions, you can flag specific holdings as “liquidate last” to help protect against being sold in such a situation.

https://www.interactivebrokers.com/en/s ... e_last.htm
wmvink
Posts: 101
Joined: Sat Apr 13, 2013 12:44 am

Re: Interactive Brokers (Best Kept Secret)

Post by wmvink »

Tanelorn wrote: Thu Mar 11, 2021 7:01 am
I’m not sure what you’re confused about. IB charges fees for various things and they’re just warning you that IF one of those things comes up, from the list of possibilities in the email, you might end up with a negative cash balance if the charges were more than the $50 you’ve got to pay them. Read the part above for how, since you don’t have a margin account to borrow to cover that possible deficit, if you do end up with a negative cash situation they will sell some of your positions automatically to cover it. If all you hold is stock, this will likely be handled very well, there’s no charge, they tend to get reasonable prices, and they only sell as much or maybe a little more to cover the negative balance.

If you’ve got options in your account or very highly appreciated stock where you don’t want to sell for tax reasons, you might double check you’re not going to trigger any of those things that might incur a fee. Options liquidations are much more dicey, bad spreads, and margin rules can sometimes be such that selling an option could increase your risk and lead to more sales. Regarding appreciated positions, you can flag specific holdings as “liquidate last” to help protect against being sold in such a situation.

https://www.interactivebrokers.com/en/s ... e_last.htm
I also received these messages for 2 of my accounts - taxable and Roth IRA.

I can tell you why OP and myself are confused: having signed up for IBKR Lite and not subscribing to any of the things you mention, all in a cash (non-margin) account, a message with the subject "Warning - Low Cash Balance" that tells me I *may* need a higher cash balance to "avoid any forced liquidation of your positions" is unexpected and troubling. Add to that that the message does not seem very targeted (why am I getting this message?), and is not very specific (how much cash?) and IBKR should understand users are confused and alarmed.
tj
Posts: 9368
Joined: Wed Dec 23, 2009 11:10 pm

Re: Interactive Brokers (Best Kept Secret)

Post by tj »

When I transferred positions from merrill edge, they sent me warnings of how much j. Seeded to wire transfer to avoid forced liquidation to pay the nerill edge closure fee. I also received the low cahs balance email. (I have 0.06 in there). Curious what they say the minimum is.
Matej Vela
Posts: 58
Joined: Tue Feb 28, 2017 1:40 am
Contact:

Re: Interactive Brokers (Best Kept Secret)

Post by Matej Vela »

Neus wrote: Wed Mar 10, 2021 8:25 pm I got this confusing email that my cash balance is not enough
[...]
This is a reminder that the cash balance in your account *****, while positive, is at a level which might not be adequate to cover possible fees and/or deductions. Please note that if your account is assessed a fee or incurs a deduction that exceeds your cash balance, your positions will be subject to forced liquidation to satisfy any resultant deficit.
I've just gotten the same email for a cash account (margin not enabled), so it's almost certainly a platform-wide change. If you open the notification in the Message Center, there's an "Opt Out" button you can click.
tj
Posts: 9368
Joined: Wed Dec 23, 2009 11:10 pm

Re: Interactive Brokers (Best Kept Secret)

Post by tj »

Is it not possible to exchange mutual funds at Interactive Brokers? I wanted to exchange 1 Vanguard Mutual Fund for another, but I only see buy and sell options. If I have to do a sell transaction individually, I'll just buy an ETF to save the extra $15.95 fee....
rchmx1
Posts: 523
Joined: Sat Oct 26, 2019 6:38 pm

Re: Interactive Brokers (Best Kept Secret)

Post by rchmx1 »

I personally wouldn't worry about automated emails from IB. At least once a month they'll send me a warning about market orders, even though I have never once placed a market order via IB. Confused me at first, but I just grew to ignore them.
Neus
Posts: 496
Joined: Fri Sep 22, 2017 2:12 am
Location: a Developing country in Asia with Low Cost of Living and Tax Treaty with USA

Re: Interactive Brokers (Best Kept Secret)

Post by Neus »

wmvink wrote: Thu Mar 11, 2021 8:49 am
Tanelorn wrote: Thu Mar 11, 2021 7:01 am
I’m not sure what you’re confused about. IB charges fees for various things and they’re just warning you that IF one of those things comes up, from the list of possibilities in the email, you might end up with a negative cash balance if the charges were more than the $50 you’ve got to pay them. Read the part above for how, since you don’t have a margin account to borrow to cover that possible deficit, if you do end up with a negative cash situation they will sell some of your positions automatically to cover it. If all you hold is stock, this will likely be handled very well, there’s no charge, they tend to get reasonable prices, and they only sell as much or maybe a little more to cover the negative balance.

If you’ve got options in your account or very highly appreciated stock where you don’t want to sell for tax reasons, you might double check you’re not going to trigger any of those things that might incur a fee. Options liquidations are much more dicey, bad spreads, and margin rules can sometimes be such that selling an option could increase your risk and lead to more sales. Regarding appreciated positions, you can flag specific holdings as “liquidate last” to help protect against being sold in such a situation.

https://www.interactivebrokers.com/en/s ... e_last.htm
I also received these messages for 2 of my accounts - taxable and Roth IRA.

I can tell you why OP and myself are confused: having signed up for IBKR Lite and not subscribing to any of the things you mention, all in a cash (non-margin) account, a message with the subject "Warning - Low Cash Balance" that tells me I *may* need a higher cash balance to "avoid any forced liquidation of your positions" is unexpected and troubling. Add to that that the message does not seem very targeted (why am I getting this message?), and is not very specific (how much cash?) and IBKR should understand users are confused and alarmed.
Yes, exactly my confusion

Btw they didn't reply me, hopefully they will at least tell me how much cash needed
Remember Rule 5: Never try to time the market. Two common timing mistakes: buying yesterday's top performers, and letting your emotions cause you to attempt to predict the direction of the stock market.
Neus
Posts: 496
Joined: Fri Sep 22, 2017 2:12 am
Location: a Developing country in Asia with Low Cost of Living and Tax Treaty with USA

Re: Interactive Brokers (Best Kept Secret)

Post by Neus »

Tanelorn wrote: Thu Mar 11, 2021 7:01 am
Neus wrote: Wed Mar 10, 2021 8:25 pm I got this confusing email that my cash balance is not enough...

Since a "Cash" type account (or a "Margin" type account with a balance below 2,000 USD) does not allow us to lend you funds to satisfy a cash deficiency, we encourage you to closely monitor your cash balance and consider depositing additional funds to avoid any forced liquidation of your positions. -Interactive Brokers Client Services
I’m not sure what you’re confused about. IB charges fees for various things and they’re just warning you that IF one of those things comes up, from the list of possibilities in the email, you might end up with a negative cash balance if the charges were more than the $50 you’ve got to pay them. Read the part above for how, since you don’t have a margin account to borrow to cover that possible deficit, if you do end up with a negative cash situation they will sell some of your positions automatically to cover it. If all you hold is stock, this will likely be handled very well, there’s no charge, they tend to get reasonable prices, and they only sell as much or maybe a little more to cover the negative balance.

If you’ve got options in your account or very highly appreciated stock where you don’t want to sell for tax reasons, you might double check you’re not going to trigger any of those things that might incur a fee. Options liquidations are much more dicey, bad spreads, and margin rules can sometimes be such that selling an option could increase your risk and lead to more sales. Regarding appreciated positions, you can flag specific holdings as “liquidate last” to help protect against being sold in such a situation.

https://www.interactivebrokers.com/en/s ... e_last.htm
Thanks, will check how to set liquidate last
Remember Rule 5: Never try to time the market. Two common timing mistakes: buying yesterday's top performers, and letting your emotions cause you to attempt to predict the direction of the stock market.
Neus
Posts: 496
Joined: Fri Sep 22, 2017 2:12 am
Location: a Developing country in Asia with Low Cost of Living and Tax Treaty with USA

Re: Interactive Brokers (Best Kept Secret)

Post by Neus »

So other strange thing occur

At my wife's account, few days ago just put all cash to stock, so her cash balance is 0

Today i check and there's about 240$ in cash

I thought i set the dividend reinvestment OFF, but i recheck and it's already ON

Anyone has any idea where does this 240$ might came from?

or how to check what it is? (what statement to generate)
Remember Rule 5: Never try to time the market. Two common timing mistakes: buying yesterday's top performers, and letting your emotions cause you to attempt to predict the direction of the stock market.
wmvink
Posts: 101
Joined: Sat Apr 13, 2013 12:44 am

Re: Interactive Brokers (Best Kept Secret)

Post by wmvink »

Neus wrote: Thu Mar 11, 2021 11:24 pm So other strange thing occur

At my wife's account, few days ago just put all cash to stock, so her cash balance is 0

Today i check and there's about 240$ in cash

I thought i set the dividend reinvestment OFF, but i recheck and it's already ON

Anyone has any idea where does this 240$ might came from?

or how to check what it is? (what statement to generate)
Go to Reports > Activity. For the time period, in your case I would just go with Month To Date so you only have to run 1 report.

If the source isn't dividends, I suspect it may come from the Stock Yield Enhancement Program.
tj
Posts: 9368
Joined: Wed Dec 23, 2009 11:10 pm

Re: Interactive Brokers (Best Kept Secret)

Post by tj »

So, i tried to sell a mutual fund at IBKR, but it seemed to say that there's a limit of 500 shares. Why would there be a limit on the number of shares I can sell?
User avatar
typical.investor
Posts: 5263
Joined: Mon Jun 11, 2018 3:17 am

Re: Interactive Brokers (Best Kept Secret)

Post by typical.investor »

Neus wrote: Thu Mar 11, 2021 11:24 pm So other strange thing occur

At my wife's account, few days ago just put all cash to stock, so her cash balance is 0

Today i check and there's about 240$ in cash

I thought i set the dividend reinvestment OFF, but i recheck and it's already ON

Anyone has any idea where does this 240$ might came from?

or how to check what it is? (what statement to generate)
Check if it's there three days later. I mean, or check if they break it down into cash you can withdraw and cash you can reinvest or if they show it as 'on hold'.

I get cash in my account but sometimes it's just being held until it is automatically reinvested. Actually, there is a bit of a delay until it gets puts into the right category and I alway worry I will try to reinvest money that is already earmarked for reinvestment - but likely I'd just get an insufficient funds notification before placing the trade. That is at Schwab but when I say "how about just having the funds marked correctly immediately" they answer "this is how brokerage works" so I wonder if it's a general thing applicable everywhere (or maybe some brokerages just don't update the cash figure until they can get it categorized correctly). A day later, the cash will show as 'on hold'.
Neus
Posts: 496
Joined: Fri Sep 22, 2017 2:12 am
Location: a Developing country in Asia with Low Cost of Living and Tax Treaty with USA

Re: Interactive Brokers (Best Kept Secret)

Post by Neus »

typical.investor wrote: Fri Mar 12, 2021 6:20 pm
Neus wrote: Thu Mar 11, 2021 11:24 pm So other strange thing occur

At my wife's account, few days ago just put all cash to stock, so her cash balance is 0

Today i check and there's about 240$ in cash

I thought i set the dividend reinvestment OFF, but i recheck and it's already ON

Anyone has any idea where does this 240$ might came from?

or how to check what it is? (what statement to generate)
Check if it's there three days later. I mean, or check if they break it down into cash you can withdraw and cash you can reinvest or if they show it as 'on hold'.

I get cash in my account but sometimes it's just being held until it is automatically reinvested. Actually, there is a bit of a delay until it gets puts into the right category and I alway worry I will try to reinvest money that is already earmarked for reinvestment - but likely I'd just get an insufficient funds notification before placing the trade. That is at Schwab but when I say "how about just having the funds marked correctly immediately" they answer "this is how brokerage works" so I wonder if it's a general thing applicable everywhere (or maybe some brokerages just don't update the cash figure until they can get it categorized correctly). A day later, the cash will show as 'on hold'.
Good point, thanks
Remember Rule 5: Never try to time the market. Two common timing mistakes: buying yesterday's top performers, and letting your emotions cause you to attempt to predict the direction of the stock market.
Neus
Posts: 496
Joined: Fri Sep 22, 2017 2:12 am
Location: a Developing country in Asia with Low Cost of Living and Tax Treaty with USA

Re: Interactive Brokers (Best Kept Secret)

Post by Neus »

wmvink wrote: Fri Mar 12, 2021 1:10 am
Neus wrote: Thu Mar 11, 2021 11:24 pm So other strange thing occur

At my wife's account, few days ago just put all cash to stock, so her cash balance is 0

Today i check and there's about 240$ in cash

I thought i set the dividend reinvestment OFF, but i recheck and it's already ON

Anyone has any idea where does this 240$ might came from?

or how to check what it is? (what statement to generate)
Go to Reports > Activity. For the time period, in your case I would just go with Month To Date so you only have to run 1 report.

If the source isn't dividends, I suspect it may come from the Stock Yield Enhancement Program.
thanks

um stock yield enchantment program is still off
Remember Rule 5: Never try to time the market. Two common timing mistakes: buying yesterday's top performers, and letting your emotions cause you to attempt to predict the direction of the stock market.
wmvink
Posts: 101
Joined: Sat Apr 13, 2013 12:44 am

Re: Interactive Brokers (Best Kept Secret)

Post by wmvink »

Neus wrote: Fri Mar 12, 2021 8:39 pm
thanks

um stock yield enchantment program is still off
Does the report provide any insight into the source of the cash? There's gotta be something?
xerxes101
Posts: 534
Joined: Sat Oct 14, 2017 11:25 am

Re: Interactive Brokers (Best Kept Secret)

Post by xerxes101 »

tj wrote: Fri Mar 12, 2021 2:47 pm So, i tried to sell a mutual fund at IBKR, but it seemed to say that there's a limit of 500 shares. Why would there be a limit on the number of shares I can sell?
I believe that is a safety mechanism / sanity check to get you to doublecheck your order...500 shares is totally arbitrary... just click through it.
Neus
Posts: 496
Joined: Fri Sep 22, 2017 2:12 am
Location: a Developing country in Asia with Low Cost of Living and Tax Treaty with USA

Re: Interactive Brokers (Best Kept Secret)

Post by Neus »

wmvink wrote: Fri Mar 12, 2021 9:04 pm
Neus wrote: Fri Mar 12, 2021 8:39 pm
thanks

um stock yield enchantment program is still off
Does the report provide any insight into the source of the cash? There's gotta be something?
At reports -> activity custom date range, can't find explanation of the source of the addition of cash

But it seems from the trade amount, the trade that supposedly set the cash to 0, which is a trade with fraction, didn't get the fraction part

It's kind of weird because i remember seeing the trade in fraction is fulfilled and see the cash balance became 0

But looking at the email order confirmation, it's indeed only fill the non fraction amount

The securities i bought in fraction is CSSPX (Ireland domiciled, London stock exchange traded equivalent of VOO)
Remember Rule 5: Never try to time the market. Two common timing mistakes: buying yesterday's top performers, and letting your emotions cause you to attempt to predict the direction of the stock market.
tj
Posts: 9368
Joined: Wed Dec 23, 2009 11:10 pm

Re: Interactive Brokers (Best Kept Secret)

Post by tj »

xerxes101 wrote: Fri Mar 12, 2021 10:09 pm
tj wrote: Fri Mar 12, 2021 2:47 pm So, i tried to sell a mutual fund at IBKR, but it seemed to say that there's a limit of 500 shares. Why would there be a limit on the number of shares I can sell?
I believe that is a safety mechanism / sanity check to get you to doublecheck your order...500 shares is totally arbitrary... just click through it.
Thanks, it'll take some getting used to with this brokerage! Ha.
xerxes101
Posts: 534
Joined: Sat Oct 14, 2017 11:25 am

Re: Interactive Brokers (Best Kept Secret)

Post by xerxes101 »

Did you guys see that new string attached to IBKR's stock lending program? What do you make of it?...makes me little nervous when I read it before signing :shock:...I just hope this is not going to implode at some point...won't be fun to deal with.
AlohaJoe
Posts: 6609
Joined: Mon Nov 26, 2007 1:00 pm
Location: Saigon, Vietnam

Re: Interactive Brokers (Best Kept Secret)

Post by AlohaJoe »

xerxes101 wrote: Sat Mar 13, 2021 7:23 am Did you guys see that new string attached to IBKR's stock lending program? What do you make of it?...makes me little nervous when I read it before signing :shock:...I just hope this is not going to implode at some point...won't be fun to deal with.
Why does it make you nervous that they're complying with updated SEC regulations on securities lending? I feel like I'm missing something here.
User avatar
Kagord
Posts: 1676
Joined: Fri Nov 23, 2018 12:28 pm
Location: Peaksville, Ohio

Re: Interactive Brokers (Best Kept Secret)

Post by Kagord »

tj wrote: Fri Mar 12, 2021 2:47 pm So, i tried to sell a mutual fund at IBKR, but it seemed to say that there's a limit of 500 shares. Why would there be a limit on the number of shares I can sell?
The warning looks like your doing something wrong, however, IB put some default precautionary settings to protect you from yourself. It's just the defaults that's causing this. In the IB Trader Workstaion Java client, click the Configure button, go to Presets, then Stocks, then scroll down to precautionary settings, you'll probably see the 500 there in the regular or algorithm config, you can change to match your risk tolerance for screwing up. I don't use the lite, buy maybe it's somewhere on the web interface too.

https://www.interactivebrokers.com/en/s ... ttings.htm
wmvink
Posts: 101
Joined: Sat Apr 13, 2013 12:44 am

Re: Interactive Brokers (Best Kept Secret)

Post by wmvink »

Kagord wrote: Sat Mar 13, 2021 8:13 am
tj wrote: Fri Mar 12, 2021 2:47 pm So, i tried to sell a mutual fund at IBKR, but it seemed to say that there's a limit of 500 shares. Why would there be a limit on the number of shares I can sell?
The warning looks like your doing something wrong, however, IB put some default precautionary settings to protect you from yourself. It's just the defaults that's causing this. In the IB Trader Workstaion Java client, click the Configure button, go to Presets, then Stocks, then scroll down to precautionary settings, you'll probably see the 500 there in the regular or algorithm config, you can change to match your risk tolerance for screwing up. I don't use the lite, buy maybe it's somewhere on the web interface too.

https://www.interactivebrokers.com/en/s ... ttings.htm
IBKR is a case study in poor UX design. For every trade, they display so many seemingly random and pointless warning messages that the user gets conditioned to ignoring them altogether.
gtwhitegold
Posts: 673
Joined: Fri Sep 21, 2012 1:55 pm

Re: Interactive Brokers (Best Kept Secret)

Post by gtwhitegold »

I'm looking to create a Interactive Brokers margin account soon. I was curious how dividends are credited to a margin account. Does it reduce the amount of money on margin or does it remain as cash? I'm looking to keep around 10% of assets on margin and to reinvest dividends when I make a monthly contribution.
Post Reply