We are seeing unprecedented volatility in GME, AMC, BB, EXPR, KOSS and a small number of other U.S. securities that has forced us reduce the leverage previously offered to these securities and, at times, limit trading to risk reducing transactions. Outlined below are a series of FAQs relating to these actions.

Q: Are there any current restrictions on my ability to trade GME and the other US securities that have been subject to the recent heightened volatility?

A: IBKR is currently not restricting customers from trading shares of AMC, GME, BB, EXPR, KOSS or the other stocks that have been the subject of extreme market volatility. That includes orders to open new positions or close existing ones.

Like many brokers, IBKR placed limits on opening new positions in certain of these securities for a period of time. Those restrictions have since been lifted.

IBKR has not restricted customers’ ability to close existing positions and does not plan to do so.

Q: Can I use margin in trading stocks, options or other derivatives on these products through IBKR?

A: IBKR has increased its margin requirements for securities in GME and the other US securities subject to the recent volatility, including up to 100% margin required for long positions and 300% margin on the short side. You can see these margin requirements in your trading platform prior to submitting an order.

Q: Why did IBKR place these restrictions on my ability to open new positions in certain securities?

A: IBKR took these actions for risk management purposes, to protect the firm and its customers from incurring outsized losses due to wild swings in prices in a volatile and unstable marketplace.

IBKR remains concerned about the effect of this unnatural volatility on the clearinghouses, brokers and market participants.

Q: Does IBKR or its affiliates have positions in these products that it was protecting by placing these restrictions?

A: No. IBKR itself has no proprietary positions in any of the securities.

Q: What allowed IBKR to place those restrictions?

A: Pursuant to its customer agreement, IBKR may decline to accept any customer’s order at IBKR’s discretion.

IBKR also has the right to modify margin requirements for any open or new positions at any time, in its sole discretion. After all, IBKR is the one whose money is being loaned in a margin trade.

Q: Did those restrictions apply to all or just some of IBKR’s customers?

A: All restrictions – all limits on opening new positions and margin increases – applied to all IBKR customers. They were placed based on the security, not based on the customer.

Q: Is my money at IBKR at risk? Has IBKR suffered material losses?

A: IBKR did not incur substantial losses. Through its prudent risk management, IBKR has navigated this market volatility well. In any event, on a consolidated basis, IBG LLC exceeds $9 billion in equity capital, over $6 billion in excess of regulatory requirements.

Q: What will IBKR do going forward? How will I know?

A: IBKR will continue to monitor developments in the market, and will make decisions based on market conditions. For current information, please continue to visit our website.

1  Dynamic House Scanning Charges are available only on select exchanges (Asian Exchanges and MEXDER)
2  IBKR will calculate the potential loss for each stock and its derivates by subjecting them to a stress test. The requirement for the stock (and its derivatives) which projects the greatest loss in the above scenario will be compared to what would otherwise be the aggregate portfolio margin requirement, and the greater of the two will be the margin requirement for the portfolio
 

1 Leverage Limits

 1.1 Margins
Leverage limits were set by CBI at different levels depending on the underlying:

• 3.33% for major currency pairs; Major currency pairs are any combination of USD; CAD; EUR; GBP; CHF; JPY
• 5% for:
  • Non-major currency pairs are any combination that includes a currency not listed above, e.g., USD.CNH
  • Major indices are IBUS500; IBUS30; IBUST100; IBGB100; IBDE40; IBEU50; IBFR40; IBJP225; IBAU200
  • Gold
• 10% for non-major equity indices; IBES35; IBCH20; IBNL25; IBHK50
• 20% for individual equities

 1.2 Applied Margins - Standard Requirement

In addition to the CBI Margins, IBKR establishes its own margin requirements (IB Margins) based on the historical volatility of the underlying, and other factors. We will apply the IB Margins if they are higher than those prescribed by CBI .

Details of applicable IB and CBI margins can be found here.

1.2.1 Applied Margins - Concentration Minimum

A concentration charge is applied if your portfolio consists of a small number of CFD and/or Stock positions, or if the three largest positions have a dominant weight. We stress the portfolio by applying a 30% adverse move on the three largest positions and a 5% adverse move on the remaining positions. The total loss is applied as the maintenance margin requirement if it is greater than the standard requirement for the combined Stock and CFD positions. Note that the concentration charge is the only instance where CFD and Stock positions are margined together.

1.3 Funding of Initial Margin Requirements

You can only use cash to post initial margin to open a CFD position.

Initially all cash used to fund the account is available for CFD trading. Any initial margin requirements for other instruments and cash used to purchase cash stock reduce the available cash. If your cash stock purchases have created a margin loan, no funds are available for CFD trades even if your account has significant equity. We cannot increase a margin loan to fund CFD margin under the CBI rules.

Realized CFD profits are included in cash and are available immediately; the cash does not have to settle first. Unrealized profits however cannot be used to meet initial margin requirements.

2 Margin Close Out Rule

2.1 Maintenance Margin Calculations & Liquidations

The CBI requires IBKR to liquidate CFD positions latest when qualifying equity falls below 50% of the initial margin posted to open the positions. IBKR may close out positions sooner if our risk view is more conservative. Qualifying equity for this purpose includes CFD cash and unrealized CFD P&L (positive and negative). Note that CFD cash excludes cash supporting margin requirements for other instruments. 

The basis for the calculation is the initial margin posted at the time of opening a CFD position. In other words, and unlike margin calculations applicable to non-CFD positions, the initial margin amount does not change when the value of the open position changes.

2.1.1 Example

You have EUR 2000 cash in your account and no open positions. You want to buy 100 CFDs of XYZ at a limit price of EUR 100. You are first filled 50 CFDs and then the remaining 50. Your available cash reduces as your trades are filled:

 *Equity equals Cash plus Unrealized P&L

The price increases to 110. Your equity is now 3000, but you cannot open additional positions because your available cash is still 0, and under the CBI rules IM and MM remain unchanged:

 The price then drops to 95. Your equity declines to 1500 but there is no margin violation since it is still greater than the 1000 requirement:

 The price falls further to 85, causing a margin violation and triggering a liquidation:

 3 Negative Equity Protection

The CBI Decision limits your CFD-related liability to the funds dedicated to CFD-trading. Other financial instruments (e.g., shares or futures) cannot be liquidated to satisfy a CFD margin-deficit.*

Therefore, non-CFD assets are not part of your capital at risk for CFD trading. 

Should you lose more than the cash dedicated to CFD trading, IB must write off the loss. 

As Negative Equity Protection represents additional risk to IBKR, we will charge retail investors an additional financing spread of 1% for CFD positions held overnight. You can find detailed CFD financing rates here.

*Although we cannot liquidate non-CFD positions to cover a CFD deficit, we can liquidate CFD positions to cover a non-CFD deficit.

The margin requirement for accounts holding concentrated positions in low cap stocks is as follows:

• An alternative stress test will be considered following the margin calculation currently in place. Here, each stock and its derivatives will be subject to a stress test which simulates a price change reflective of a $500 million decrease in capitalization (e.g., 25% in the case of a stock with a market capitalization of $2 billion; 30% for a stock with a market capitalization of $1.5 billion; etc.). Stocks with a market capitalization of $500 million or below will be subject to a stress test as if the price has fallen to $0.
• For the stock which projects the greatest loss assuming a $500 million decrease in capitalization, that loss will be compared to the initial margin as determined under the preceding calculation for the aggregate portfolio and, if greater, will become the initial margin requirement.
• If the initial margin requirement is increased, the maintenance margin for that same stock and its derivatives will increase to approximately 90% of the initial requirement for the aggregate portfolio.