Although the default method for order submission is intended to be direct entry by the client into either the TraderWorkstation, WebTrader or Mobile Trader execution platform, IB will provide broker assistance for select trades in the circumstances outlined below:
1. Large or Complex Orders - clients who trade large or complex orders having a trade size of at least 100 option contracts or 10,000 shares may wish to use the specialized services of our Broker Assisted Trading Desk. The Broker Assisted Trading Desk handles both opening and closing orders and is staffed to provide immediate access with no phone queue or wait time. Note that trades executed through this desk are subject to commision rates which are greater than the published rates for self-directed orders. As rates vary by product type and listing exchange, we recommend that you contact the desk directly at 1-203-618-4030 for specific pricing details. For additional information, please refer to the website link titled 'Broker Assistance' below.
2. Emergency Closing Orders - in the event the client is temporarily unable to access the trading platform and needs to close a position, assistance may be obtained by contacting the trade desk of one of our Customer Service Centers. It should be noted that this service is provided solely to accommodate closing trades and is associated with a Telephone Order commission surcharge. The amount of this surcharge varies by the Base Currency of the account with USD based accounts subject to a $30 surcharge (in addition to regular stated commissions). For additional information, please refer to the website link titled 'Fees' below.
IB allows account holders to designate and maintain their account as either a 'Margin' or 'Cash' type of account at the point of application. If one maintains a 'Margin' type account, the proceeds from closing stock sales are made available for trading effective with the sale transaction, however, the account holder may not withdraw those funds from the account until such time as settlement has taken place and IB has been credited with the proceeds from the clearinghouse (generally 3 business days).
If one maintains a 'Cash' type account, proceeds from closing stock sales are not available for trading or withdrawal until settlement has been completed. To provide otherwise would constitute an extension of credit which is prohibited from being offered to 'Cash' accounts.
Click here for information on upgrading from a 'Cash' type account to a 'Margin' type account.
For regulatory purposes IB is required to segregate the securities assets within your account from the commodities assets. Those commodities assets may include the market value of options on futures positions plus any cash required as margin as a result of commodities futures and options on futures positions. Periodically, the margin requirement on your commodities positions will be recomputed and should this requirement decline, cash in excess of that required as commodities margin will be transferred from the commodities side of your account to the securities side. Likewise, should the commodities margin requirement increase, IB will transfer any available cash from the securities side to the commodities side. As SIPC insurance is provided to assets on the securities side of your account but not the commodities, this periodic transfer is performed to ensure that your cash balance is afford the greatest protection possible. It should be noted that these cash movements represent journal entries within your account which serve to fully offset each other and therefore have no impact upon the aggregate cash balance within your account (see the Total column within the Cash Report section of the Activity Statement).
There are a variety of symbol conventions for denoting Berkshire Hathaway Class B shares (CUSIP 084670207). On the IB trading platforms, this security is designated by entering BRK, then a space and then B (BRK B). This compares to Bloomberg which uses the convention BRK/B and Yahoo Finance which uses BRK-B.
It should also be noted that this security has been designated as a 10-share unit issue by its primary listing exchange, NYSE Arca, due to its relatively low trading volume. A round lot in this security is therefore set at 10 shares as opposed to the standard round lot unit of 100 shares. If your opening buy or sell order is for an amount less than 10 shares, it is considered an odd-lot and subject to special handling considerations. Please review our website under the Trading and then Order Types menu options for additional details.
Interactive Brokers does not have a special rule regarding stocks that trade below $5. Although other brokerage firms may have a house rule regarding stocks trading below $5, IB does not employ such a rule.
There are other IB-specific rules to consider in this scenario, however. In general, IB would not have a special rule for long positions in stock trading below $5, as long as they are exchange-listed. Once a stock is delisted from one of the exchanges and moved to the OTC market, it would be subject to a 100% margin requirement, since the stock would no longer be considered marginable.
Also for long positions, the maintenance margin requirement is 30% of the stock value or $2,000, whichever is greater.
For short positions, the maintenance requirement on stock greater than $5, is $5 per share or 30% of the stock value, whichever is greater. For short positions in stock where the last sale price/share is less than $5, then the maintenance margin requirement is $2.50 per share or 100% of the stock value, whichever is greater.
Regulation SHO, adopted by the SEC in January 2005, sets forth the regulatory framework governing short sales. Two key provisions, intended to address problems associated with persistent fails to deliver and potentially abusive naked short selling, involve locate and close-out requirements.
Under the locate requirement, a broker-dealer must have reasonable grounds to believe that the security can be borrowed so that it can be delivered on the delivery due date before effecting a short sale order.
The close-out requirement requires that the clearing broker take immediate action to close out a fail to deliver position in a threshold security that has persisted for 13 consecutive settlement days by purchasing securities of like kind and quantity. Until the position is closed out, the broker may not effect further short sales in that threshold security without borrowing or entering into a bona fide agreement to borrow the security (known as the "pre-borrowing" requirement)
In October 2008, the SEC amended Regulation SHO with temporary Rule 204T (in place until July 31, 2009) which requires that any broker having a fail to deliver position at NSCC on the settlement date immediately borrow or purchase securities to close out the amount of the fail to deliver position by no later than the beginning of regular trading hours on the following settlement date (the “Close-Out Date”). This close-out requirement requires that the broker take affirmative action to purchase or borrow securities and not offset the fail to deliver position with shares it will receive on the Close-Out Date. Rule 204T applies to all securities not just threshold securities.
When traders attempt to sell short a stock which IB does not currently have in inventory to loan them, IB will look for these shares “on the street”, which means from other brokerage firms. This search is conducted on a best-efforts only basis. While IB searches for the shares, the order status box on the TWS Order Management page should be dark green, and will show a small icon of a pair of binoculars, which indicates we are searching. In the WebTrader, there are no status colors or icons. The order will simply not execute as IB searches for the shares on the street.
IB will issue a warning message to any margin account approaching a maintenance margin deficiency (and therefore potential forced liquidation of positions). This message is generated when the Equity With Loan Value (ELV for a stock account = Cash + Stock + Bond + Mutual Fund + Non-US Options) is less than or equal to the Maintenance Margin Requirement * 105%. The warning message reads as follows:
ALERT: the financial capacity in this account is less than 5% above the current margin requirement. To avoid a possible liquidation, please monitor the account to ensure that there is positive excess liquidity.
An account which hold stock positions that are full-paid (i.e. no cash debit) remains susceptible to liquidation if the account falls into deficit and the loan value of the stock is insufficient to cover the debit. This is often the case, for example, when a margin account holds positions subject to 100% margin and a cash balance of $0. In the event the account is assessed a fee, such as commission, monthly minimum activity or market data subscription, a negative cash balance would results and IB would not be able to extend loan value against these securities to support the debit balance. The account would therefore be subject to a liquidation in an amount sufficient to cover any cash deficit.
Accordingly, the recipient of this warning message may wish to maintain a cash balance in an amount sufficient to cover any potential charges to the account and to avoid a forced liquidation.
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.