What is the meaning of Mark-to-Market and First In, First Out?


Mark-to-Market (MTM) refers to the method of calculating values for positions based on daily movements of the position calculated against the closing or settlement price of the product for that day.  At the end of each business day, the open positions carried in an account are credited or debited funds based on the settlement price of the open positions that day. 

First In, First Out (FIFO) is the practice of using the first initiated position in a security as the trade that is paired off against the most recent closing trade in that same security.  This method is often used for tax accounting purposes.  In other words, it is the method of valuing securities which uses the oldest items in inventory first.

What is the Mark-to-Market calculation method and how does it work?


Mark-to-market (MTM) is a method of valuing positions and determining profit and loss which is used by IBKR for TWS and statement reporting purposes. Under MTM, positions are valued in the Market Value section of the TWS Account Window based upon the price which they would currently realize in the open market.  Positions are also valued using the MTM method for statement purposes and it is one of the methods by which profit or loss is computed.  Other methods available include First In, First Out (FIFO), Last In, First Out (LIFO), and Maximum Loss. 

MTM P&L shows how much profit or loss was made over the statement period, regardless of whether positions are open or closed and with no requirement that closing transactions be matched to an opening transaction. The MTM methodology rather assumes that all open positions and transactions are settled at the end of each day and new positions are opened the next day. For purposes of simplification, MTM calculations are split into two calculations: 1) calculations for transactions which took place during the statement period, referred to as Transaction MTM on the statement; and 2) calculations for positions which were open prior to the start of the period, referred to as Prior Period MTM on the statement.


For example, assume 100 shares of hypothetical stock XYZ are purchased at $50.00 on Day 1; another 200 shares are purchased on Day 2 at $52.00; 200 shares are sold on Day 3 at $53.00 and another 100 on Day 4 at $53.50.  Also assume that the closing prices for XYZ on Days 1, 2, 3 and 4 are $50.50, $51.50, $54.00 and $54.00, respectively. The MTM statement calculations for each day are as follows:

Day 1

Transaction MTM  - $50.00  ((50.50 – 50.00) * 100 )

Prior Period MTM  -   $0.00

 Total MTM  -           $50.00


Day 2

Transaction MTM  - ($100.00)  ((51.50 – 52.00) * 200 )

Prior Period MTM  -  $100.00   ((51.50 – 50.50) * 100 )

 Total MTM  -                $0.00


Day 3

Transaction MTM  - ($200.00)  ((54.00 – 53.00) * -200 )

Prior Period MTM  -  $750.00   ((54.00 – 51.50) * 300 )

 Total MTM  -            $550.00


Day 4

Transaction MTM  -  ($50.00)  ((53.50 – 54.00) * 100 )

Prior Period MTM  -     $0.00   ((54.00 – 54.00) * 100 )

 Total MTM  -            ($50.00)


Total - $550.00



Account holders should note that profit and loss calculations are calculated for statement reporting purposes solely and should consult with their tax advisor regarding their obligations with respect to reporting gains and losses for tax reporting purposes.

Are non-US residents subject to withholding for tax purposes?



Information relating to tax obligations is reported as required to the tax authorities within your country of residence as well as other countries if trading products subject to any local withholding requirements.  Unless specifically directed by a taxing authority, IBKR does not withhold taxes on proceeds from security sales. We are required by US tax law, for example, to withhold US taxes on dividends paid by US corporations to foreign persons at a rate of 30%. This rate may be lower if the US has entered into a tax treaty with your country. In addition, investment interest income is not subject to US withholding. All withholdings for non-US persons and most entities will be reported on Form 1042-S at the close of each year. For further information refer to IRS publication 901 and/or your tax advisor.

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