Why was I liquidated?

Overview: 

The majority of all liquidations occur due to margin violations.  There are two main types of margin violations that apply to margins accounts, Maintenance Margin and Reg. T Margin.

In addition to a margin deficit, liquidations may occur as a result of post expiration exposure or various other account-specific reasons which may be dependent upon the account type as well as the specific holdings within the account.  For a detailed list of Risk Management algorithms applied to ensure account compliance and which may result in account liquidations, please review IB's website, under Trading - Margins.

 

Background: 

1.  Maintenance Margin violation:  In an account, the Equity with Loan Value (ELV) must always be greater than the Current Maintenance Margin Requirement (MMR) on the positions that are being held in the account.  The difference between ELV and MMR is Current Excess Liquidity; therefore an easier way for some people to monitor their account is to remember that the Current Excess Liquidity in their account must always be positive.  If the Current Excess Liquidity in an account goes negative, this is a maintenance margin violation. 

2.  Reg T violation:  In the Balances section of the Account Window there is a figure titled Special Memorandum Account (SMA).  The U.S. Fed has an enforcement period for this account; 15:50-16:15 EST each trading day.  During this 25 minute window, the SMA balance must be positive.  If the SMA is negative at any point between 15:50 and 17:20 EST, this constitutes a Reg T margin violation. 

In the event of a margin violation, the account is subject to automatic liquidation on a real-time basis.  Liquidations are accomplished with market orders, and any/all positions in the account can be liquidated.