Security Device Replacement Charge

Account holders logging into their account via IBKR's Secure Login System are issued a security device, which provides an additional layer of protection to that afforded by the user name and password, and which is intended to prevent online hackers and other unauthorized individuals from accessing their account. While IBKR does not charge any fee for the use of the device, certain versions require that the account holder return the device upon account closing or incur a replacement fee.  Existing account holders are also subject to this replacement fee in the event their device is lost, stolen or damaged (note that there is no fee to replace a device returned as a result of battery failure). 

In addition, while IBKR does not assess a replacement fee unless a determination has been made that the device has been lost, stolen, damaged or not returned, a reserve equal to the fee will placed upon the account upon issuance of the device to secure its return.  This reserve will have no effect upon the equity of the account available for trading, but will act as limit to full withdrawals or transfers until such time the device is returned (i.e., cannot withdraw the reserve balance).

Outlined below are the replacement fee associated with each device.

SECURITY DEVICE REPLACEMENT FEE
Security Code Card1 $0.001
Digital Security Card + $20.00 

For instructions regarding the return of security devices, please see KB975

 

1 The Security Code Card is not required to be returned upon account closing and may be destroyed and discarded once remaining funds have been returned and the account has been fully closed. Access to Client Portal after closure for purposes of viewing and retrieving activity statements and tax documents is maintained using solely the existing user name and password combination. This type of two-factor security is no longer being issued.

Why Do Commission Charges on U.S. Options Vary?

IBKR's option commission charge consists of two parts:

1. The execution fee which accrues to IBKR.  For Smart Routed orders this fee is set at $0.65 per contract, reduced to as low as $0.15 per contract for orders in excess of 100,000 contracts in a given month (see website for costs on Direct Routed orders, reduced rates on low premium options and minimum order charges); and 

2. Third party exchange, regulatory and/or transaction fees.

In the case of third party fees, certain U.S. option exchanges maintain a liquidity fee/rebate structure which, when aggregated with the IBKR execution fee and any other regulatory and/or transaction fees, may result in an overall per contract commission charge that varies from one order to another.  This is attributable to the exchange portion of the calculation, the result of which may be a payment to the customer rather than a fee, and which depends upon a number of factors outside of IBKR's control including the customer's order attributes and the prevailing bid-ask quotes.

Exchanges which operate under this liquidity fee/rebate model charge a fee for orders which serve to remove liquidity (i.e., marketable orders) and provide a credit for orders which add liquidity (i.e., limit orders which are not marketable). Fees can vary by exchange, customer type (e.g., public, broker-dealer, firm, market maker, professional), and option underlying with public customer rebates (credits) generally ranging from $0.10 - $0.90 and public customer fees from $0.01 - $0.95. 

IBKR is obligated to route marketable option orders to the exchange providing the best execution price and the Smart Router takes into consideration liquidity removal fees when determining which exchange to route the order to when the inside market is shared by multiple (i.e., will route the order to the exchange with the lowest or no fee).  Accordingly, the Smart Router will only route a market order to an exchange which charges a higher fee if they can better the market by at least $0.01 (which, given the standard option multiplier of 100 would result in price improvement of $1.00 which is greater than the largest liquidity removal fee).

For additional information on the concept of adding/removing liquidity, including examples, please refer to KB201.

Overview of SEC Fees

Under Section 31 of the Securities Exchange Act of 1934, U.S. national securities exchanges are obligated to pay transaction fees to the SEC based on the volume of securities that are sold on their markets. Exchange rules require their broker-dealer members to pay a share of these fees who, in turn, pass the responsibility of paying the fees to their customers.

This fee is intended to allow the SEC to recover costs associated with its supervision and regulation of the U.S. securities markets and securities professionals. It applies to stocks, options and single stock futures (on a round turn basis); however, IB does not pass on the fee in the case of single stock futures trades.  Note that this fee is assessed only to the sale side of security transactions, thereby applying to the grantor of an option (fee based upon the option premium received at time of sale) and the exerciser of a put or call assignee (fee based upon option strike price).

For the fiscal year 2016 the fee was assessed at a rate of $0.0000218 per $1.00 of sales proceeds, however, the rate is subject to annual and,in some cases, mid-year adjustments should realized transaction volume generate fees sufficiently below or in excess of targeted funding levels.1

Examples of the transactions impacted by this fee and sample calculations are outlined in the table below.

Transaction

Subject to Fee?

Example

Calculation

Stock Purchase

No

N/A

N/A

Stock Sale (cost plus commission option)

Yes

Sell 1,000 shares MSFT@ $25.87

$0.0000218 * $25.87 * 1,000 = $0.563966

Call Purchase

No

N/A

N/A

Put Purchase

No

N/A

N/A

Call Sale

Yes

Sell 10 MSFT June ’11 $25 calls @ $1.17

$0.0000218 * $1.17 * 100 * 10 = $0.025506

Put Sale

Yes

Sell 10 MSFT June ’11 $25 puts @ $0.41

$0.0000218 * $0.41 * 100 * 10 = $0.008938

Call Exercise

No

N/A

N/A

Put Exercise

Yes

Exercise of 10 MSFT June ’11 $25 puts

$0.0000218 * $25.00 * 100 * 10 = $0.545

Call Assignment

Yes

Assignment of 10 MSFT June ’11 $25 calls

$0.0000218 * $25.00 * 100 * 10 = $0.545

Put Assignment

No

N/A

N/A

 

1Information regarding current Section 31 fees may be found on the SEC's Frequently Requested Documents page located at: http://www.sec.gov/divisions/marketreg/mrfreqreq.shtml#feerate

 

 

Overview of Fees

Clients and as well as prospective clients are encouraged to review our website where fees are outlined in detail.

An overview of the most common fees is provided below:

1. Commissions - vary by product type and listing exchange and whether you elect a bundled (all in) or unbundled plan. In the case of US stocks, for example, we charge $0.005 per share with a minimum per trade of $1.00.

2. Interest - interest is charged on margin debit balances and IBKR uses internationally recognized benchmarks on overnight deposits as a basis for determining interest rates. We then apply a spread around the benchmark interest rate (“BM”) in tiers, such that larger cash balances receive increasingly better rates, to determine an effective rate.  For example, in the case of USD denominated loans, the benchmark rate is the Fed Funds effective rate and a spread of 1.5% is added to the benchmark for balances up to $100,000.  In addition, individuals who short stock should be aware of special fees expressed in terms of daily interest where the stock borrowed to cover the short stock sale is considered 'hard-to-borrow'. 

 3. Exchange Fees - again vary by product type and exchange. For example, in the case of US securities options, certain exchanges charge a fee for removing liquidity (market order or marketable limit order) and provide payments for orders which add liquidity (limit order). In addition, many exchanges charge fees for orders which are canceled or modified.

4. Market Data - you are not required to subscribe to market data, but if you do you may incur a monthly fee which is dependent upon the vendor exchange and their subscription offering. We provide a Market Data Assistant tool which assists in selecting the appropriate market data subscription service available based upon the product you wish to trade. To access, log in to Portal click on the Support section and then the Market Data Assistant link.

5. Minimum Monthly Activity Fee - there is no monthly minimum activity requirement or inactivity fee in your IBKR account. 

6. Miscellaneous - IBKR allows for one free withdrawal per month and charges a fee for each subsequent withdrawal. In addition, there are certain pass-through fees for trade bust requests, options and futures exercise & assignments and ADR custodian fees.

For additional information, we recommend visiting our website and selecting any of the options from the Pricing menu option.

 

Priority of Professional Customer Orders

U.S. option exchanges have rules that distinguish between orders originating from public customers (i.e., not broker-dealers) whose trading behavior is deemed to be “Professional” (i.e., persons or entities trading in a manner more akin to a market maker than to a typical customer) and those whose trading behavior is not.  In accordance with these rules, any customer that is not a broker-dealer and averages more than 390 option orders (for its own beneficial account(s)) per day in U.S.-listed options in at least one month of a calendar quarter will be classified as Professional.

Orders submitted on behalf of Professional customers are treated the same as those of broker-dealers for purposes of execution priority and fees. 

Brokers are required to conduct a review on at least a quarterly basis to identify those customers who have exceeded the 390 order threshold for any month in that quarter, and such customers will be designated as Professional as of the next calendar quarter.

Order Counting

The definition of an order for these purposes varies slightly across exchanges, and customers seeking specific options counting rules (especially in connection with the use of algorithmic order types that might result in placing orders on both sides of the market under certain circumstances) should review the relevant exchange rulebooks and guidance. However, for purposes of options order counting, an order is generally defined as:

  • A single order;
  • A complex order of 8 or fewer option legs;
  • Each option leg of a complex order of 9 or more option legs; or
  • A parent order, even if that order is broken into multiple child orders on the same side/series by a broker for execution or routing purposes (except in connection with orders pegged to the NBBO, as discussed below). 

A customer-initiated cancelation and replacement (by any method, including, for example, as a result of Scale orders) of a parent order counts as a new order(s) according to the logic above (e.g., a cancel/replace of a single-leg order counts as one new order, whereas a cancel/replace of a nine-option-leg order counts as nine new orders). 

Orders Pegged to the NBBO/BBO

Note that for customers who use options orders pegged to the NBBO or BBO (such as, for example, relative orders or Pegged Volatility orders, or other parent order types designed to move with the NBBO/BBO), each cancel/replace of a child order based on a change in the NBBO/BBO constitutes an additional new order. Customers resting pegged orders in IBUSOPT for participation in RFQ auctions should also be aware that a pegged order will be treated as canceled and replaced each time such order participates in an RFQ auction in IBKR’s system (whether or not such order becomes an initiating order in an on-exchange auction). 

 

Account Aggregation

In calculating order totals, brokers must aggregate the options orders of all beneficially-owned accounts of the customer. IBKR aggregates options orders from an individual’s or entity’s account with those of related joint accounts, trust accounts, and organizational accounts.

 

Customers will be notified by IBKR upon a status change from a retail customer to a Professional customer. In addition, IBKR’s smart order router is designed to take exchange fees (including differences between professional and non-professional customer fees) into consideration when making routing decisions.

For additional details, please see the following links:

CBOE Regulatory Circular RG16-064

 

ISE 2014 RIC and 2016 RIC

NYSE AMEX 10-29

 

Handling procedures for fractional fees

It should be noted that certain exchange fees as well as IB commission rates are established at levels beneath  that of the smallest increment by which a given currency is defined (e.g. $0.01 in the case of the USD).  In the event a customer incurs a fee having an extended value below this minimum increment, the fee will be calculated at its extended value and then rounded up or down to the nearest whole minimum increment of that currency.   

This rounding process may result in occurrences where the aggregate rounded commission charge as reflected in the cash balance section of the Activity Statement on a given day is $0.01 higher than the sum of the rounded charge reflected on a line item basis in the trades section. An example of this may occur for a sample series of option trades for a given day is provided below. 

EXAMPLE:

Action Calculated Fee (extended) Statement - Trades  Section (rounded at a line item level) Statement - Cash Balance Section (rounded at an aggregate level)
Customer buys one U.S. securities option, incurring a minimum commission charge of $1.00 plus an exchange Option Regulatory Fee of $0.014 $1.014 $1.01 N/A
Customer buys one U.S. securities option, incurring a minimum commission charge of $1.00 plus an exchange Option Regulatory Fee of $0.014 $1.014 $1.01 N/A
Totals $2.028 $2.02 $2.03

 

 

 

How do I determine which market data subscription is applicable for a given security?

IBKR provides account holders with a Market Data Assistant tool which assists in selecting the subscription services available for a given security (stock, option or warrant) they wish to trade. The search results show all exchanges upon which the product trades, the subscription offering and its monthly fee for both Professional and Non-Professional clients as well as the depth of market variations associated with each subscription.

To access the Market Data Assistant:

  1. Log in to Client Portal
  2. Click on the Help menu (question mark icon in the top right corner) followed by Support Center
  3. Scroll down and select Market Data Assistant
  4. Enter the Symbol or ISIN and the Exchange
  5. Choose a value for the optional filters: Professional/Non Professional subscriber status, Currency and Asset
  6. Click Search
  7. Review the available options and decide which subscription best meets your needs.

Find more information on the market data selections page of the IBKR website.

Glossary terms: 

ADR pass-through fees

Account holders maintaining positions in American Depository Receipts (ADRs) should note that such securities are subject to periodic fees intended to compensate the agent bank providing custodial services on behalf of the ADR.  These services typically, include inventorying the foreign stocks underlying the ADR and managing all registration, compliance and record-keeping services.

Historically, the agent banks were only able to collect the custody fees by subtracting them from the ADR dividend, however, as many ADRs do not regularly pay dividends, these banks have been unable to collect their fees.  As a result, in 2009, the Depository Trust Company (DTC) received SEC approval to begin collecting these custody fees on behalf of the banks for ADRs which do not pay periodic dividends.  DTC collects these fees from its participant brokers (such as IB) who hold the ADRs for their clients.  These fees are referred to as pass-through fees as they are designed to be then collected by the broker from its clients.

If you hold a position in a dividend paying ADR, these fees will be deducted from the dividend as they have in the past.  If you hold a position in an ADR which does not pay a dividend, this pass-through fee will be reflected on the monthly statement of the record date in which it is assessed.  Similar to the treatment of cash dividends, IB will attempt to reflect upcoming ADR fee allocations within the Accruals section of the account statements as well. Once charged, the fee will be reflected in the Deposits & Withdrawals section of the statement with the description 'Adjustments - Other' along with the symbol of the particular ADR it is associated with.

While the amount of this fee will generally range from $0.01 - $0.03 per share, the amounts may differ by ADR and it is recommended that you refer to your ADR prospectus for specific information.  An on-line search for the prospectus may be conducted through the SEC's EDGAR Company Search tool.

Glossary terms: 
ADR

Options Regulatory Fee (ORF)

The ORF is an exchange fee which OCC collects from its clearing members, including IBKR. Its stated purpose is to assist in offsetting exchange costs relating to the supervision and regulation of the options market (e.g., routine surveillance, investigations, and policy, rule-making, interpretive and enforcement activities). The fee was initiated by the CBOE in mid-2009, by each of the BOX, ISE and PHLX in January 2010, by AMEX and ARCA in May 2011, by Nasdaq in January 2012, by C2 in August 2012, by Miami in January 2013, by ISE GEMINI in August 2013, by BATS in February 2015, by Nasdaq BX in February 2016, by BATS EDGX in February 2017, by PEARL in February 2017 and by MERCURY and EMERALD in February 2019. As of February 1, 2023, it is assessed to customer orders at a rate of $0.02905 per U.S. exchange listed option contract with the rate per exchange as follows: 

EXCHANGE ORF
AMEX 0.0055
ARCA 0.0055
BATS 0.0001
BOX 0.00295
CBOE 0.0017
C2 0.0003
EDGX 0.0001
EMERALD 0.0006
ISE 0.0014
GEMINI 0.0013
MERCURY 0.0004
MIAX 0.0019
NOM 0.0016
NASDAQBX 0.0005
PEARL 0.0018
PHLX 0.0034
Total 0.02905

Note that the ORF is assessed on all trades, both buys and sells, in addition to the IBKR commission charge as well as any existing exchange fees (e.g., liquidity removal) and will be reflected on the Activity Statement as a Regulatory Fee.

When I short a stock, when will the hard to borrow interest begin accruing?

Short positions will have a borrow interest/fee associated with them.

Borrow interest will begin being charged on a short position from short settlement date to buy-to-cover settlement date.

For example, you sell XYZ on Monday, and you close the position on Tuesday. Borrow interest would start to be charged upon Wednesday's settlement date (T+2). Interest would cease to be charged on Thursday, the settlement date (T+2) of the buy-to-cover order.

 

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