Our brokerage custodian, Interactive Brokers1, is preparing for elevated volatility before and after the 2020 United States presidential election in November. As a result, margin requirements2 on Futures & Derivatives will increase by as much as 35% above normal requirements, starting September 28, 2020.
What instruments are impacted?
Interactive Brokers plans to increase Equity Index Futures & Derivatives margins by the aforementioned 35%. For example, ES futures and similar products based on the S&P 500 index would go from a scanning range of approximately 7% to 9.6%.
These instruments will NOT be impacted, as their margin rates already exceed their futures equivalents:
- Stocks
- ETFs
- Commodities
- Forex
- Bonds
Other instruments not mentioned above may also not be affected.
Schedule of Changes
- Initial margin requirements: Gradual daily increases from normal levels starting September 28th to a rate that will be 35% higher by October 23rd.
- Maintenance margin requirements: Gradual daily increases in a similar manner between October 5th and October 30th.
These new requirements will be implemented daily after the market closes in New York, and will be effective the next trading day.
Based on these new changes, accounts that are unable to meet the new margin requirements will be subject to automated liquidations3 in order to bring the account into margin compliance. Accounts subject to risk based margin will have their scanning ranges increased in a similar manner.
Example
Consider a Reg. T margin account with stock XYZ having an Initial Margin requirement of 50% and a Maintenance Margin requirement of 25%. With the increase fully implemented, the new requirements would be 67.5% Initial and 33.75% Maintenance.
Note: Interactive Brokers may make additional changes to the margin on certain products, or all products, depending on volatility. This includes changes built into the standard margin model as well as any new house margin requirements that may be imposed.
1Euro Pacific Trader is offered by Euro Pacific Securities Inc. (“Euro Pacific Securities”), as an Introducing Broker to Interactive Brokers LLC. Interactive Brokers LLC is the custodian, technology provider, and clearing broker to all transactions executed through Euro Pacific Trader and thus the rates, conditions, and examples shown on this site may be subject to change and differ from what is displayed on Euro Pacific Trader. The rates, conditions, and examples on this site are provided on a best-efforts basis and should not be taken as final.
Euro Pacific Securities will not be held responsible for pricing and conditional discrepancies that may arise in the normal course of offering Euro Pacific Trader. Customers should always review and rely on the conditions that are shown directly on Euro Pacific Trader, and it is the responsibility of all customers to carefully review the conditions of every action before approving execution on Euro Pacific Trader.
Interactive Brokers LLC is a registered Broker-Dealer, Futures Commission Merchant and Forex Dealer Member, regulated by the U.S. Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA), and is a member of the Financial Industry Regulatory Authority (FINRA) and several other self-regulatory organizations. Interactive Brokers LLC does not endorse or recommend any introducing brokers, third-party financial advisors or hedge funds, including Euro Pacific Securities. Interactive Brokers LLC provides execution and clearing services to customers. None of the information contained herein constitutes a recommendation, offer, or solicitation of an offer by Interactive Brokers LLC to buy, sell or hold any security, financial product or instrument or to engage in any specific investment strategy. Interactive Brokers LLC makes no representation, and assumes no liability to the accuracy or completeness of the information provided on this website.
For more information regarding Interactive Brokers, please visit www.interactivebrokers.com.
2 Information on Interactive Broker’s margin rules can be reviewed in this article. To monitor your Euro Pacific Trader available margin balance, please read this guide.
3 Interactive Brokers (IB) will liquidate your positions without prior notice until your account complies with margin requirements. IB automatic liquidation of under-margined accounts is designed to protect customers and to protect IB in times of market turmoil.