The particular regulation which determines the minimum amount of margin collateral that each broker is required to collect from clients transacting in U.S. exchange listed products generally depends upon the following 3 factors:
1. Product Classification - the principal determinant of regulatory oversight is based upon whether the product is classified as a security or commodity. Security products, including stocks, bonds, options and mutual funds are regulated by the Securities and Exchange Commission (SEC). Commodity products, which include futures contracts and options on futures contracts, are regulated by the Commodities Futures Trading Commission (CFTC). Single stock futures, a special class of futures contracts, are considered a hybrid product subject to joint regulation by the SEC and CFTC.
In the case of security products, the US central bank referred to as the Federal Reserve (FRB) holds responsibility for regulating the extension of credit by brokers and dealers. This is accomplished through Regulation T, or Reg T as it is commonly referred, which provides for establishment of a margin account and which imposes the initial margin requirement and payment rules on certain securities transactions. For example, on stock purchases, Reg T currently requires an initial margin deposit by the client equal to of 50% of the purchase value, allowing the broker to extend credit or finance the remaining 50%. Reg T does not establish margin requirements for securities options which fall under the jurisdiction of exchange rules (subject to SEC approval). In addition, the FRB has excluded from Reg T the authority to establish either initial or maintenance margin requirements on securities positions held in a portfolio margining account. here margin authority resides with the security exchanges whose rules are subject to SEC approval.
The authority for establishing margin rates on commodity products resides with the listing exchanges, with the exception of broad based stock index futures, for which the FRB has delegated authority to the CFTC.
In the case of single stock futures, margin is set by the listing exchange and subject to SEC approval to the extent the position is carried in a securities account, and subject to an agreement that the margin be equivalent whether held in a securities or commodities account. Margin for single stock futures are currently set at 20% of the underlying stock value.
2. Initial or Maintenance - initial margin generally refers to the amount of money or its equivalent that the customer must deposit in order to initiate the position and maintenance margin the amount of equity which must be maintained in order to continue holding the position. As noted above, Reg T controls the initial margin requirement on securities transactions. The rules of the listing exchanges specify the maintenance margin requirements on security transactions subject to SEC approval. The maintenance margin requirement for long stock positions is currently set at 25% although brokers often establish 'house margin' requirements in excess of that, particularly where the security is considered low-priced or subject to volatile price changes.
Commodities exchanges establish both the initial and maintenance margin requirements for products which they list (subject to provisions for broad based index futures and single stock futures as noted above).
3. Listing Exchange - as noted above, in the case of US securities products the listing exchange has the authority to establish rules for the maintenance margin requirement on positions held in a Reg T margin account and initial and maintenance margin (currently the same) for positions held in a portfolio margin account. Exchange margin rules, however, require prior SEC approval which acts to ensure that margin requirements are set in a consistent manner across exchanges.
Subject to the provisions noted above, commodities exchanges maintain authority to establish both initial and maintenance margin requirements. As a general rule, US commodities exchanges employ the same risk-based margining methodology referred to as SPAN for determining the margin requirement on listed positions with each exchange specifying the relevant SPAN input factors (e.g., Price Scan Range, Volatility Scan Range, Spread Charges, Combined Commodity offsets).
The security questions represent just one component of the security framework which IB has put into place to protect your account. We offer the following simple tips for selecting your security questions and answers in order to make the most effective use of this security measure:
1. Choose questions having answers that you can remember in the future and answer consistently.
2. Use one-word answers whenever possible.
3. Be careful with spaces. If you use "San Diego" as an answer to one of your security questions, the system will reject "SanDiego."
4. Avoid using quirky or nonsensical answers as they'll likely to be difficult to remember later.
5. Select a question which cannot be easily guessed or researched, has many possible answers and where the probability of guessing the correct answer is low.
6. Select a question for which the answer is unlikely to be known by others such as a family member, close friend, relative, ex-spouse, or significant other.
7. Choose a question having an answer which is stable and not likely to change over time.
IB requires applicants to select and provide answers to three security questions each selected from a separate pool of questions having varying degrees of complexity. In the event we receive a telephone inquiry involving sensitive information, prior to acknowledging or discussing any account specific information with the caller we will first look to verify that caller's identity. This is accomplished through a multi-tier security process, one tier which requires that the caller answer a randomly selected security question. The caller must provide an answer to the security question which exactly matches the answer we have on file. Otherwise, the request for information will be denied and a potential lock-down placed upon the account.
While applicants are required to provide IB with notification as to the amount they intend to fund their account with and the manner in which they fund the account in order to have the application considered for approval, there is no requirement that the funding actually take place prior to approval.
Applicants may nevertheless elect to remit funds via wire, check or electronic funds transfer (e.g., ACH, EFT) prior to receiving confirmation of account approval in an effort to accelerate commencement of any credit hold period. It should be noted, however, that deposits received prior to account approval are held in suspense and are not credited to the account nor eligible to accrue interest until the application has been approved. In the case where the applicant has authorized IB to fund the account via asset transfer (e.g., ACATS, ATON) from another broker, IB will not initiate the transfer until the application has been approved.
The security of your assets and personal information is of utmost concern to us and we are committed to taking the steps necessary to make certain you are protected from the moment you open up your account.
As IB LLC is a carrying broker domiciled in the U.S., it is required to report information and, in certain instances, make payment of withholding taxes to the U.S. tax authority, the Internal Revenue Service for all account holders. To certify oneself as a non-U.S. person, a Form W-8 is requested at the time of application and is required to be re-certified every three years thereafter. If IB does not receive the W-8 or the account holder fails to re-certify the W-8 in a timely manner, then the account holder is presumed to be a US person and, absent a W-9, may then be subject to back-up withholding taxes on interest, dividends and substitute payments in lieu, as well as gross proceeds.
By certifying yourself as a non-U.S. person through a properly completed W-8, your U.S. withholding is limited to dividends issued by US corporations. Note that virtually all countries apply withholding taxes when local companies seek to distribute dividends to externally based shareholders (whether those shareholders are corporate or not). The rate at which IB is obligated to withhold for a given payment depends largely upon whether there is a tax treaty in place between the country where the dividend paying country is based and the country of residence of the dividend recipient.
The Registration Confirmation Number is a random numeric code sent to the applicant's email address which serves to register the email address as valid once the number has been retrieved and entered into the application. Failure to receive the email containing this number can generally be attributed to one of two causes:
3 simple questions can help you choose a tax certification form. Read the questions and select the form. For more detailed help, see Tax Information & Reporting.
|• U.S. Citizen||• U.S. Business or Organization|
|• U.S. Green Card Holder||• U.S. Domestic Trust|
|• U.S. Legal Resident|
If the answer is YES, complete Form W-9
If the answer is NO, go to # 2.
|• H-1B Visa Holder||• TN Visa Holder
|• O-1 Visa Holder|
If the answer is YES, find your status by the "substantial presence test." See More U.S. Legal Resident Info
If the answer is NO, go to # 3.
*Question does Not apply to U.S. Citizens/Entities or Green Card Holders
|• Permanent Home Outside of U.S||• Entity Formed Outside of U.S.|
|•Business or Organization formed outside of U.S.|
If the answer is YES, complete Form W-8 (U.S. Citizens, Green Card Holders, and Entities still complete the W-9.)
NOT SURE because you work, live, or study in the U.S. then, see More U.S. Legal Resident Info
Disclaimer: IB does not provide tax advice. These statements are provided for information purposes only, are not intended to constitute tax advice which may be relied upon to avoid penalties under any international, federal, state, local or other tax statutes or regulations, and do not resolve any tax issues in your favor. We recommend that you consult a qualified tax adviser or refer to the U.S. Internal Revenue Service.
Filling out a tax certification form is required to open an IB account. The forms confirm your tax status in relation to the United States. Information provided by you may lower or exempt the U.S. tax withholding on your account.
This article will help you to:
►Choose the correct certification form ►Find your tax treaty benefits
►Fill out and submit your form online ►Answer tax certification questions
Which Form Do You Pick?
Tax Treaty Benefits
Management of account activity differs for each account type. IB is a U.S. broker and must follow U.S. guidelines. 3 simple questions help you choose the right form
Some countries have a tax treaty with the U.S. Find out if you benefit from a lower tax-withholding rate. Tax Treaty Benefit Info
Filling Out The Form
Tax Certification – FAQ’s
|The certification form is direct. Supply basic account information on the true owner of the assets or entity. Select W-9 Instructions or W-8 Instructions for help.||Seek professional advice for tax questions. These common questions and answers may help you make an informed decision. Tax Certification - Frequently Asked Questions|
Disclaimer: IB does not provide tax advice. These statements are provided for information purposes only, are not intended to constitute tax advice which may be relied upon to avoid penalties under any international, federal, state, local or other tax statutes or regulations, and do not resolve any tax issues in your favor. We recommend that you consult a qualified tax advisor or refer to the U.S. Internal Revenue Service.
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