Exposure Fee Calculations Overview

Introduction

IBKR's global risk management routine includes a daily execution of computations through which each client’s portfolio is stress tested to determine its exposure to a series of prices changes beyond that protected by margin. These stress tests serve to identify accounts that, while margin compliant, project losses which exceed the account’s equity were these scenarios to be realized and which IBKR regards as excessive. In an effort to increase client awareness as to their potential exposure, IBKR has implemented a daily Exposure Fee, that is assessed to any account reporting end of day uncovered risk in excess of specified levels.

 

Current Exposure Fee Overview

In its current form, the Exposure Fee is applied to Equity, Equity Volatility, Crude and Refined Oil Products. Interactive Brokers simulates profit and loss scenarios for all accounts based on simulated upward and downward market movements, of certain predefined magnitudes. An aggregate gain or loss will result for each of the predefined scenarios and the largest loss, if any, among those scenarios, is then reduced by the net liquidating equity of the account to determine if any portion of the loss is uncovered. If it is, the uncovered portion is subject to a daily Exposure Fee.

 

Change to the Exposure Fee Calculation (Effective March 19, 2018)

We will implement a change to the current Exposure Fee calculation that is intended to reflect a more comprehensive set of market scenarios in addition to price dependencies among products types not previously considered. The calculation is based upon a Monte Carlo simulation which incorporates thousands of market scenarios and projects the exposure of your portfolio assuming sector-based price changes (e.g., individual stock and sectors such as oil, gas, meat, sugar, cocoa, metals, foreign exchange & crypto-currencies), and then applying this evaluation to all other products based upon their respective sector correlation.

 

Managing the Exposure Fee

At the initial point an account is detected as being subject to the Exposure Fee, a communication will be sent out explaining the fee and affording the account holder one week to adjust positions and equity before the Fee, if still applicable, will take effect.  To assist with avoidance or mitigation of the Fee, IBKR provides a daily Exposure Fee Calculation report via Account Management which details the Fee and provides examples of hypothetical adjustments to existing positions which, if implemented, are projected to reduce the Fee given information then available.

 

Primary Risk Factors

Each portfolio will be re-valued based upon stressing each primary risk factor, which is represented by an index or ETF, and all other product(s) in the portfolio will adjusted based upon their correlation associated with that primary risk factor.

Below is a summary of each risk factor, the representing Index or ETF, and the upper and lower range in which we stress each risk factor.

Risk Factor
Product
Lower Bound
Upper Bound
Equity
SPX
-30.00%
20.00%
Individual Stocks
 
-50%
50%
Cocoa
CHOC
-31.80%
47.40%
Cotton
COTN
-50%
50%
Crypto
NYXBT
-100%
93.90%
Gas
UNG
-19.70%
84.90%
Ind. Metals.
DBB
-29.50%
29.30%
Meat
COW
-15.00%
21.40%
Oil
USO
-18.80%
62.00%
Prec. Metals
DBP
-28.70%
32.30%
Sugar
SGG
-34.50%
52.30%
Treasury
TLT
-19.80%
15.60%
Wheat
OD7S
-40.90%
64.70%
Soybean SOYB -22.6% 27.4%
Corn CORN -23.5% 41.5%

 

Forex Risk Factors
Lower Bound
Upper Bound
AUD
-18.10%
18.10%
CAD
-13.70%
13.70%
CHF
-13.90%
13.90%
CNH
-8.20%
8.20%
CNY
-6.70%
6.70%
CZK
-9.50%
9.50%
DKK
-7.90%
7.90%
EUR
-9.90%
9.90%
GBP
-13.00%
13.00%
HKD
-8.00%
8.00%
HUF
-20.50%
20.50%
ILS
-8.80%
8.80%
INR
-12.40%
12.40%
JPY
-16.80%
16.80%
KRW
-18.00%
18.00%
MXN
-16.70%
16.70%
NOK
-12.90%
12.90%
NZD
-14.60%
14.60%
PLN
-31.40%
31.40%
RUB
-27.80%
27.80%
SEK
-13.20%
13.20%
SGD
-6.30%
6.30%
TRY
-40.10%
40.10%
USD
-9.30%
9.30%
ZAR
-19.00%
19.00%

 

For additional information concerning this Exposure Fee Calculation report, please see KB3113.