IB Stock Yield Enhancement Program
PROGRAM OVERVIEW
The Stock Yield Enhancement Program offers participants the opportunity to earn additional income on their full-paid shares by lending those shares to IB in exchange for a portion of the fees short sellers are willing to pay to borrow them. Upon enrollment, Program activities are managed in their entirety by IB and require no actions on the part of participants. These activities include management is automatic and IB will administer all activities on participants behalf, including the following:
- Identifying the shares in client accounts which borrowers are attempting to locate;
- Establishment of loans and returns;
- Crediting of loan fee income (expressed as an interest accrual for activity statement reporting purposes); and
- Reporting of loan activity, cash collateral transfers and income on the activity statements;
In contrast to the securities lending programs offered by others, IB provides complete transparency as to the market rate and gross fees earned from each transaction which will be split equally between the client and IB.
HOW IT WORKS
- Clients may enroll in the Program by logging into Account Management and selecting the Trading Access and then Trading Configuration menu options and then checking the box marked Stock Yield Enhancement Program. Activation generally takes place overnight. Eligible accounts include any IB LLC or IB UK margin accounts and IB LLC or IB UK cash accounts with equity in excess of USD 50,000.
- Once activated, IB will review on a daily basis the inventory of eligible shares held by the participant vis-a-vis that which is necessary to satisfy internal and external borrow demand. If the supply of eligible shares exceeds borrow demand, clients will be allocated loans on a pro rata basis (e.g. if aggregate supply is 20,000 shares and aggregate demand 10,000, each client will be eligible to have 50% of their shares loaned).
- At the end of each day that any loan is in place, the client will receive a payment presented as an interest accrual which is credited to equity and which represents 1/2 of gross lending fee charged to the end borrower. The remaining 1/2 accrues to IB as compensation for managing the loan. The details regarding the transaction, including the quantity of shares loaned, collateral amount, market fee rate, gross fee, IB management charge and net fee are reflected on the daily activity statement.
- Clients maintain full control of loaned shares with no impairment as to:
* Market exposure ( i.e., will continue to recognize profit or loss consistent with stock price move);
* The ability to sell at any time without prior notice;
* Hedges (e.g., covered calls, protective puts);
* The representation of holdings in statements and the trading platform; and
* Cost basis
SPECIAL CONSIDERATIONS
- Loaned shares may not be protected by SIPC, however, the cash collateral received for the loaned securities is segregated within the 15c3-3 Reserve Account and therefore subject to the same investment restrictions;
- The market fee rate for any given loan is subject to supply and demand considerations that are outside the control of IB and which are susceptible to change from one day to another without advance notice or limit as to the magnitude of change. The net fee income available to participants will reflect such changes;
- Proxy voting rights on loaned shares are forfeited (rights go to borrower);
- Participants will not receive actual dividends on loaned shares but instead a cash payment equivalent to the full dividend to be paid on the same date as the dividend (referred to as a 'Payment in Lieu'). As a Payment in Lieu is treated differently than a dividend for U.S. tax reporting purposes, certain taxpayers may not receive the more favorable tax treatment afforded to dividend payments deemed 'qualified';
- Loaned shares are typically used to facilitate short sales and such transactions may affect the value of shares.
For additional FAQs relating to the Yield Enhancement Program, click here.
Stock Yield Enhancement Program FAQs
What is the purpose of the Stock Yield Enhancement Program?
The Stock Yield Enhancement program provides customers with the opportunity to earn additional income on securities positions which would otherwise be segregated (i.e., fully-paid and excess margin securities) by permitting IB to lend out those securities to third parties. Customers who participate in the program will receive a portion of the fee paid by the borrower as loan compensation for any day the loan exists and will receive cash collateral to secure the return of the stock loan at its termination.
What are fully-paid and excess margin securities?
Fully-paid securities are securities in a customer’s account that have been completely paid for. Excess margin securities are securities that have not been completely paid for, but whose market value exceeds 140% of the customer’s margin debit balance.
How is the income received by a customer on any given Stock Yield Enhancement Program loan transaction determined?
The income which a customer receives in exchange for shares lent depend upon loan rates established in the over-the-counter securities lending market. These rates can vary significantly not only by the particular security loaned but also by the loan date. In addition, IB assesses a Management Fee equal to 50% of the net loan fees paid in exchange for initiating, terminating and managing transactions. In determining the customer’s portion of these fees, the Market Fee Rate % is applied to the loan collateral and this daily Gross Lending Fee is split equally between IB and the customer. For example, assume loan collateral of $10,000 and an annualized Market Fee Rate of 15%. In this example the daily Gross Lending Fee would be $4.16 (($10,000 *.15)/360), of which $2.08 would accrue to the customer and $2.08 to IB as its Management Fee. Lending fees are calculated and accrued daily similar to interest credits.
How is the amount of cash collateral for a given loan determined?
The cash collateral underlying the security loan and used for determining interest payments is determined using standard industry convention whereby the closing price of the stock is multiplied by 102% and then rounded up to the nearest whole dollar. For example, a loan of 100 shares of a stock which closes at $59.24 would be equal to $6,100 ($59.24 * 1.02 = $60.4248; round to $61, multiply by 100).
What are the eligibility requirements for participation in the IB Stock Yield Enhancement Program?
All IB LLC and IB UK margin accounts or IB LLC and IB UK cash accounts with equity over $50,000 at the time of application are eligible. IB Canada, IB Japan and IB India customers are not eligible. Japanese and Indian clients maintaining accounts with IB LLC are eligible.
In addition, Financial Advisor client accounts, fully disclosed IBroker clients, non-disclosed IBroker clients and Omnibus Brokers who meet the above requirements can participate. In the case of Financial Advisors and fully disclosed IBrokers, the clients themselves must sign the agreements. For non-disclosed IBroker and Omnibus Brokers, the broker signs the agreement.
Are IRA accounts eligible to participate in the Stock Yield Enhancement Program?
No.
How do I enroll in the IB Stock Yield Enhancement Program?
Clients who are eligible and who wish to enroll in the Stock Yield Enhancement Program may do so by selecting Trading Access and then Trading Configuration from Account Management and then checking the box on the Trading Permissions matrix titled "United States (Stock Yield Enhancement Program)".
What happens if equity in a participating cash account falls below the $50,000 qualifying threshold?
The cash account must meet this minimum equity requirement solely at the point of signing up for the program. If the equity falls below that level thereafter there is no impact upon existing loans or the ability to initiate new loans.
What is the difference between AQS and the IB Stock Yield Enhancement Program?
Clients lending through AQS participants self-direct their activity based upon information provided via AQS’ automated centralized market. In contrast, loans transacted through the Stock Yield Enhancement Program are determined and managed by IB.
Can I participate in both AQS and the IB Stock Yield Enhancement Program?
Clients can only lend in one program at a time. If, for example, a client signs up for the Yield program and is already approved for AQS lending, we will disable their ability to lend at AQS and recall their loans. They will still, however, retain the ability to borrow through AQS and can see market data. If the client disables the Yield Enhancement Program, their AQS loan permissions will be re-enabled. In sum, the yield program always takes precedence.
If my account is eligible for AQS am I automatically eligible to participate in the IB Stock Yield Enhancement Program?
No.
If my account is eligible for the IB Stock Yield Enhancement Program am I automatically eligible to participate in AQS?
No.
How does one terminate Stock Yield Enhancement Program participation?
Clients who wish to terminate participation in the Stock Yield Enhancement Program may do so by selecting Trading Access and then Trading Configuration from Account Management and then removing the check from the box on the Trading Permissions matrix titled "United States (Stock Yield Enhancement Program)".
Requests to terminate are typically processed at the end of the day.
What types of securities positions are eligible to be lent?
Eligible securities include U.S. common stocks (exchange listed, PINK and OTCBB), ETFs, preferred stocks and corporate bonds. Municipal bonds and non-U.S. securities are not eligible.
Is there any restriction on lending stocks which are trading in the secondary market following an IPO?
No, as long as IB is not part of the selling group.
How does IB determine the amount of shares which are eligible to be loaned?
The first step is to determine the value of securities, if any, which IB maintains a margin lien upon and can lend without client participation in the Stock Yield Enhancement Program. A broker who finances client purchases of securities via margin loan is allowed by regulation to loan or pledge as collateral that client’s securities in an amount up to 140% of the cash debit balance. For example, if a client maintaining a cash balance of $50,000 buys securities having a market value of $100,000, the debit or loan balance will be $50,000 and the broker holds a lien on 140% of that balance or $70,000 of securities. Any securities held by the client in excess of that amount are referred to as excess margin securities ($30,000 in this example) and are required to be segregated unless the client provides IB the authorization to lend through the Stock Yield Enhancement Program.
The debit balance is determined by first converting all non-USD denominated cash balances to USD and then backing out any short stock sale proceeds (converted to USD as necessary). If the result is negative then we free up 140% of that negative number. In addition, cash balances maintained in the commodities segment or for spot metals and CFDs are not considered.
EXAMPLE 1: Customer is long EUR 100,000 in a USD Base Currency account with a EUR.USD rate of 1.40. Customer purchases USD denominated stock valued at $112,000 (EUR 80,000 equivalent). All securities are deemed fully-paid as cash balance as converted to USD is a credit.
| Component | EUR | USD | Base (USD) |
| Cash | 100,000 | (112,000) | $28,000 |
| Long Stock | $112,000 | $112,000 | |
| NLV | $140,000 |
EXAMPLE 2: Customer holds long USD of 80,000, long USD denominated stock of $100,000 and short USD denominated stock of $100,000. Long securities totaling $28,000 are deemed margin securities and the remainder of $72,000 excess margin securities. This is determined by subtracting the short stock proceeds from the cash balance ($80,000 - $100,000) and multiplying the resultant debit by 140% ($20,000 * 1.4 = $28,000)
| Component | Base (USD) |
| Cash | $80,000 |
| Long Stock | $100,000 |
| Short Stock | ($100,000) |
| NLV | $80,000 |
Will IB lend out all eligible shares?
There is no guarantee that all eligible shares in a given account will be loaned through the Stock Yield Enhancement Program as there may not be a market at an advantageous rate for certain securities, IB may not have access to a market with willing borrowers or IB may not want to loan your shares.
Are Stock Yield Enhancement Program loans made only in increments of 100 (similar to AQS)?
No. Loans can be made in any whole share amount although externally we only lend in multiples of 100 shares. Thus the possibility exists that we would lend 75 shares from one client and 25 from another should there be external demand to borrow 100 shares.
How are loans allocated among clients when the supply of shares available to lend exceeds the borrow demand?
In the event that the demand for borrowing a given security is less than the supply of shares available to lend from participants in our Yield Enhancement Program, loans will be allocated on a pro rata basis (e.g. if aggregate supply is 20,000 and demand is 10,000, each client will be eligible to have 50% of his/her shares lent)
Are shares loaned only to other IB clients or to other third parties?
Shares may be loaned to any counterparty and is not limited solely to other IB clients.
Can the Stock Yield Enhancement Program participant determine which shares IB can lend?
No. The program is entirely managed by IB who, after determining those securities, if any, which IB is authorized to lend by virtue of a margin loan lien, has the discretion to determine whether any of the fully-paid or excess margin securities can be loaned out and to initiate the loans.
Are there any restrictions placed upon the sale of securities which have been lent through the Stock Yield Enhancement Program?
Loaned shares may be sold at any time, without restriction. The shares do not need to be returned in time to settle your sale of the share and proceeds from the sale are credited to the client’s account on the normal settlement date. In addition, the loan will be terminated on the open of the business day following the security sale date.
Can a client write covered calls against stock which has been loaned out through the Stock Yield Enhancement Program and receive the covered call margin treatment?
Yes. A loan of stock has no impact upon its margin requirement on an uncovered or hedged basis since the lender retains exposure to any gains or losses associated with the loaned position.
What happens to stock which is the subject of a loan and which is subsequently delivered against a call assignment or put exercise?
The loan will be terminated on T+1 of the action (trade, assignment, exercise) which closed or decreased the position.
What happens to stock which is the subject of a loan and which is subsequently halted from trading?
A halt has no direct impact upon the ability to lend the stock and as long as IB can continue to loan the stock, such loan will remain in place regardless of whether the stock is halted.
Can the cash collateral from a loan be swept to the commodities segment to cover margin and/or variation?
No. The cash collateral securing the loan never impacts margin or financing.
What happens if a program participant initiates a margin loan or increases an existing loan balance?
If a client maintains fully-paid securities which have been loaned through the Stock Yield Enhancement Program and subsequently initiates a margin loan, the loan will be terminated to the extent that the securities do not qualify as excess margin securities. Similarly, if a client maintaining excess margin securities which have been loaned through the program increases the existing margin loan, the loan may again be terminated to the extent that the securities no longer qualify as excess margin securities.
Under what circumstances will a given stock loan be terminated?
In the event of any of the following, a stock loan will be automatically terminated:
- If the client elects to terminate program participation
- Transfer of shares
- Borrowing of a certain amount against the shares
- Sale of shares
- Call assignment/put exercise
- Account closure
Do participants in the Stock Yield Enhancement Program receive dividends on shares loaned?
While the lender of the securities is entitled to receive the amount of all dividends and distributions made on loaned securities, they may receive cash payments, commonly referred to PILs, in lieu of dividends. Depending upon ones holding period for the shares loaned, the receipt of a PIL may have an adverse tax impact for certain U.S. taxpayers as such payments are taxed as ordinary income rather than at the reduced rate associated with qualified dividends. IB will attempt to mitigate the payment of PILs by recalling shares prior to a dividend, however, IB cannot guarantee that the borrower will be able to return the shares within the necessary time frame to avoid PIL treatment.
Do participants in the Stock Yield Enhancement Program retain voting rights for shares loaned?
No. the borrower of the securities has the right to vote or provide any consent with respect to the securities if the Record Date or deadline for voting, providing consent or taking other action falls within the loan term.
How are loans reflected on the activity statement?
Loan collateral, shares outstanding, activity and income is reflected in the following 6 statement sections:
1. Cash Detail – details starting cash collateral balance, net change resulting from loan activity (positive if new loans initiated; negative if net returns) and ending cash collateral balance.
2. Net Stock Position Summary – for each stock details total Shares at IB, the number of Shares Borrowed, the number of Shares Lent (through AQS or the Stock Yield Enhancement Program) and the Net Shares (=Shares at IB + Shares Borrowed - Shares Lent). 
3. IB Managed Securities Lent – lists for each stock loaned through AQS or the Stock Yield Enhancement Program the Quantity of shares loaned, the Net Fee Rate (%) and the Collateral Amount. 
4. IB Managed Securities Lent Activity – details the loan activity for each security including Loan Return Allocations (i.e., terminated loans); New Loan Allocations (i.e., initiated loans); the share Quantity; the Net Fee Rate (%) and the Collateral Amount. 
5. IB Managed Securities Lent Activity Fee Details – details on an individual loan basis the Market Fee Rate (%); the Gross Lend Fee (represents the total fee charged to the borrower which is equal to {Collateral Amount * Market Fee Rate}/360); the IB Management Charge (equals 50% of the Gross Lend Fee); the Net Lend Fee Rate (represents the half of the Market Fee Rate which the client earns) and the Net Lend Fee (represents the client’s portion of the fee income. Equals the Gross Lend Fee - IB Management Charge).
Note: This section will only be displayed if the Net Lend Fee accrual exceeds USD 1 for the statement period. 
6. Interest Accruals – the loan fee income is accounted for here as an interest accrual and is treated as any other interest accrual (aggregated but only displayed as an accrual when exceeding $1 and posted to cash monthly). For year-end reporting purposes, this fee income will be reported as miscellaneous income on the Form 1099 issued to U.S. taxpayers.
Considerations for Optimizing Order Efficiency
Account holders are encouraged to routinely monitor their order submissions with the objective of optimizing efficiency and minimizing 'wasted' or non-executed orders. As inefficient orders have the potential to consume a disproportionate amount of system resources. IB measures the effectiveness of client orders through the Order Efficiency Ratio (OER). This ratio compares aggregate daily order activity relative to that portion of activity which results in an execution and is determined as follows:
OER = (Order Submissions + Order Revisions + Order Cancellations) / (Executed Orders + 1)
Outlined below is a list of considerations which can assist with optimizing (reducing) one's OER:
1. Cancellation of Day Orders - strategies which use 'Day' as the Time in Force setting and are restricted to Regular Trading Hours should not initiate order cancellations after 16:00 ET, but rather rely upon IB processes which automatically act to cancel such orders. While the client initiated cancellation request which serve to increase the OER, IB's cancellation will not.
2. Modification vs. Cancellation - logic which acts to cancel and subsequently replace orders should be substituted with logic which simply modifies the existing orders. This will serve to reduce the process from two order actions to a single order action, thereby improving the OER.
3. Conditional Orders - when utilizing strategies which involve the pricing of one product relative to another, consideration should be given to minimizing unnecessary price and quantity order modifications. As an example, an order modification based upon a price change should only be triggered if the prior price is no longer competitive and the new suggested price is competitive.
4. Meaningful Revisions – logic which serves to modify existing orders without substantially increasing the likelihood of the modified order interacting with the NBBO should be avoided. An example of this would be the modification of a buy order from $30.50 to $30.55 on a stock having a bid-ask of $31.25 - $31.26.
5. RTH Orders – logic which modifies orders set to execute solely during Regular Trading Hours based upon price changes taking place outside those hours should be optimized to only make such modifications during or just prior to the time at which the orders are activated.
6. Order Stacking - Any strategy that incorporates and transmits the stacking of orders on the same side of a particular underlying should minimize transmitting those that are not immediately marketable until the orders which have a greater likelihood of interacting with the NBBO have executed.
7. Use of IB Order Types - as the revision logic embedded within IB-supported order types is not considered an order action for the purposes of the OER, consideration should be given to using IB order types, whenever practical, as opposed to replicating such logic within the client order management logic. Logic which is commonly initiated by clients and whose behavior can be readily replicated by IB order types include: the dynamic management of orders expressed in terms of an options implied volatility (Volatility Orders), orders to set a stop price at a fixed amount relative to the market price (Trailing Stop Orders), and orders designed to automatically maintain a limit price relative to the NBBO (Pegged-to-Market Orders).
The above is not intended to be an exhaustive list of steps for optimizing one's orders but rather those which address the most frequently observed inefficiencies in client order management logic, are relatively simple to implement and which provide the opportunity for substantive and enduring improvements. For further information or questions, please contact the Customer Service Technical Assistance Center.
List of Chinese Stocks Subject to Increased Margin Requirements
Overview:
As a result of elevated risk concerns, the list of stocks below are subject to an increased 'house' margin requirement of 100% (i.e. no loan value). Note that this list may be subject to periodic updates.
| ISSUER NAME | SYMBOL | PRIMARY LISTING EXCHANGE |
| 3SBIO INC-ADR | SSRX | NASDAQ |
| AAA ENERGY INC | AAV | FWB |
| ABRA MINING LTD | AII | ASX |
| ACORN INTERNATIONAL INC-ADR | ATV | NYSE |
| ACTIONS SEMICONDUCTOR CO-ADR | ACTS | NASDAQ |
| AGRIA CORP - ADR | GRO | NYSE |
| AIRMEDIA GROUP INC-ADR | AMCN | NASDAQ |
| AIRTAC INTERNATIONAL GROUP | 1590 | TAI |
| AMBOW EDUCATION HOLDING-ADR | AMBO | NYSE |
| ANDATEE CHINA MARINE FUEL SE | AF0 | SWB |
| ANDATEE CHINA MARINE FUEL SE | AMCF | NASDAQ |
| APOLLO SOLAR ENERGY INC | FXA | SWB |
| A-POWER ENERGY GENERATION | APWR | NASDAQ |
| A-POWER ENERGY GENERATION | 4OS | FWB |
| ASIAINFO-LINKAGE INC | ASIA | NASDAQ |
| ASIAINFO-LINKAGE INC | AFB | IBIS |
| ATA INC-ADR | ATAI | NASDAQ |
| BCD SEMICONDUCTOR MANUFA-ADR | BCDS | NASDAQ |
| BIOSTAR PHARMACEUTICALS INC | 7BN | SWB |
| BIOSTAR PHARMACEUTICALS INC | BSPM | NASDAQ |
| BITAUTO HOLDINGS LTD-ADR | BITA | NYSE |
| BODISEN BIOTECH INC | DZ9 | FWB |
| BOHAI PHARMACEUTICALS GROUP | 3B2 | SWB |
| BONA FILM GROUP LTD-SPON ADR | BONA | NASDAQ |
| BOYUAN CONSTRUCTION GROUP IN | BOY | TSE |
| CAMELOT INFORMATION SYS-ADS | CIS | NYSE |
| CHANGYOU.COM LTD-ADR | CYOU | NASDAQ |
| CHARM COMMUNICATIONS INC-ADR | CHRM | NASDAQ |
| CHEMSPEC INTL LTD - ADR | CPC | NYSE |
| CHINA 3C GROUP | GXS | SWB |
| CHINA BAK BATTERY INC | B6J | FWB |
| CHINA BAK BATTERY INC | CBAK | NASDAQ |
| CHINA CABLECOM HOLDINGS LTD | CCUN | IBIS |
| CHINA CABLECOM HOLDINGS LTD | CABL | NASDAQ |
| CHINA CENTURY DRAGON MEDIA I | ZDR | SWB |
| CHINA CERAMICS CO LTD | CCCLU | NASDAQ |
| CHINA CERAMICS CO LTD | C9E | SWB |
| CHINA CGAME INC | CA6N | IBIS |
| CHINA CGAME INC | CCGM | NASDAQ |
| CHINA DASHENG BIOTECHNOLOGY | 16D | FWB |
| CHINA DIGITAL TV HOLDING-ADR | STV | NYSE |
| CHINA DISTANCE EDUCATION-ADR | DL | NYSE |
| CHINA ENERGY CORP | ZCE | SWB |
| CHINA ENERGY RECOVERY INC | CNI | FWB |
| CHINA FINANCE ONLINE CO-ADR | JRJC | NASDAQ |
| CHINA GENGSHENG MINERALS INC | CGS | FWB |
| CHINA GRENTECH CORP LTD-ADR | GRRF | NASDAQ |
| CHINA INDUSTRIAL WASTE MANAG | GD9 | TIQSSWB |
| CHINA KANGTAI CACTUS BIO-TEC | IWN1 | FWB |
| CHINA LINEN TEXTILE INDUSTRY | C60 | SWB |
| CHINA MASS MEDIA CORP-ADR | CMM | NYSE |
| CHINA MEDICAL TECH-SPON ADR | CMED | NASDAQ |
| CHINA MEDICINE CORP | XM2 | SWB |
| CHINA NEPSTAR CHAIN DRUG-ADR | NPD | NYSE |
| CHINA NUOKANG BIO-PH-SP ADR | NKBP | NASDAQ |
| CHINA ORGANIC AGRICULTURE IN | 4CA | FWB |
| CHINA POWER EQUIPMENT INC | 5XP | TIQSSWB |
| CHINA REDSTONE GROUP INC | RS0 | SWB |
| CHINA RITAR POWER CORP | YXC | SWB |
| CHINA RUNJI CEMENT INC | WRJ | SWB |
| CHINA SHENGDA PACKAGING GROU | 0CH | FWB |
| CHINA SHENGDA PACKAGING GROU | CPGI | NASDAQ |
| CHINA SHENGHUO PHARMACEUTICA | 54C | IBIS |
| CHINA SHENGHUO PHARMACEUTICA | KUN | AMEX |
| CHINA SHUANGJI CEMENT LTD | C99N | FWB |
| CHINA SOLAR & CLEAN ENERGY S | NCS2 | FWB |
| CHINA SUN GROUP HIGH-TECH CO | BP7 | FWB |
| CHINA SUNERGY CO LTD-ADR | CSUN | NASDAQ |
| CHINA TECHFAITH WIRELESS-ADR | CNTF | NASDAQ |
| CHINA TMK BATTERY SYSTEMS IN | T35 | SWB |
| CHINA WATER GROUP INC | DI1 | FWB |
| CHINA XD PLASTICS CO LTD | 02Y | FWB |
| CHINA XINIYA FASHIO-SPON ADR | XNY | NYSE |
| CHINA ZENIX AUTO INTERNA-ADR | ZX | NYSE |
| CHINACACHE INTERNAT-SPON ADR | CCIH | NASDAQ |
| CHINAEDU CORP-ADR | CEDU | NASDAQ |
| CLEANTECH SOLUTIONS INTERNAT | CLNT | NASDAQ |
| CLEANTECH SOLUTIONS INTERNAT | CWZN | FWB |
| CNINSURE INC-ADR | CISG | NASDAQ |
| CONCORD MEDICAL - SPON ADR | CCM | NYSE |
| COUNTRY STYLE COOKI-SPON ADR | CCSC | NYSE |
| DAQO NEW ENERGY CORP-ADR | DQ | NYSE |
| DEHAIER MEDICAL SYSTEMS LTD | J8D | FWB |
| DEHAIER MEDICAL SYSTEMS LTD | DHRM | NASDAQ |
| DUOYUAN PRINTING INC | DPT | FWB |
| EASTERN ENVIRONMENT SOLUTION | V5E | SWB |
| E-COMMERCE CHINA-SPON ADR | DANG | NYSE |
| EFUTURE INFORMATION TECHNOLO | 4EF | FWB |
| ELONG INC-SPONSORED ADR | LONG | NASDAQ |
| ETERNAL TECHNOLOGIES GROUP | ETO | FWB |
| FORLINK SOFTWARE CORP | YNO1 | FWB |
| FUNTALK CHINA HOLDINGS LTD | FTLK | NASDAQ |
| FUQI INTERNATIONAL INC | 3F6A | IBIS |
| FUWEI FILMS HOLDINGS CO LTD | F4B | IBIS |
| GC CHINA TURBINE CORP | 7GC | SWB |
| GLG LIFE TECH CORPORATION | GLG | TSE |
| GLOBAL EDUCATION & TECH-ADR | GEDU | NASDAQ |
| GOLD HORSE INTERNATIONAL INC | 0GH | SWB |
| GUSHAN ENVIRONMENTAL ENE-ADR | GU | NYSE |
| HANGFENG EVERGREEN INC | HF | TSE |
| HARTCOURT COMPANIES INC | HCT | SWB |
| HIGHPOWER INTERNATIONAL INC | HKN | SWB |
| HIGHPOWER INTERNATIONAL INC | HPJ | NASDAQ |
| HISOFT TECHNOLOGY INT-ADR | HSFT | NASDAQ |
| HOLLYSYS AUTOMATION TECHNOLO | 46H | FWB |
| HOLLYSYS AUTOMATION TECHNOLO | HOLI | NASDAQ |
| IFM INVESTMENTS LTD-ADS | CTC | NYSE |
| ITONIS INC | IX2 | IBIS |
| JA SOLAR HOLDINGS CO LTD-ADR | JASO | NASDAQ |
| JADE ART GROUP INC | JAC | SWB |
| JIAYUAN.COM INTERNATIONA-ADR | DATE | NASDAQ |
| JINGWEI INTERNATIONAL LTD | WJI | SWB |
| JINKOSOLAR HOLDING CO-ADR | JKS | NYSE |
| JINPAN INTERNATIONAL LTD | 3QN | FWB |
| JINPAN INTERNATIONAL LTD | JST | NASDAQ |
| KANDI TECHNOLOGIES CORP | K8A | FWB |
| KINGTONE WIRELESSINFO SO-ADR | KONE | NASDAQ |
| KU6 MEDIA CO LTD-SPN ADR | KUTV | NASDAQ |
| LDK SOLAR CO LTD -ADR | LDK | NYSE |
| LEGEND MEDIA INC | LM2 | SWB |
| LENTUO INTERNATI-SPON ADS | LAS | NYSE |
| LINKWELL CORP | LHX | SWB |
| LIZHAN ENVIRONMENTAL CORP | LZEN | NASDAQ |
| MECOX LANE LTD-ADR | MCOX | NASDAQ |
| MIGAO CORPORATION | MGO | TSE |
| MINCO SILVER CORPORATION | MSV | TSE |
| MINDRAY MEDICAL INTL LTD-ADR | MR | NYSE |
| NETQIN MOBILE INC - ADR | NQ | NYSE |
| NEW DRAGON ASIA CORP | BQ4 | IBIS |
| NOAH EDUCATION HOLDINGS-ADR | NED | NYSE |
| ORIGIN AGRITECH LTD | 39O | SWB |
| ORIGIN AGRITECH LTD | SEED | NASDAQ |
| ORSUS XELENT TECHNOLOGIES IN | O5X | FWB |
| ORSUS XELENT TECHNOLOGIES IN | ORS | AMEX |
| OSSEN INNOVATION CO-SPON ADR | OSN | NASDAQ |
| PHOENIX NEW MEDIA LTD -ADS | FENG | NYSE |
| PRIME ACQUISITION CORP | PACQ | NASDAQ |
| PRIME ACQUISITION CORP | PACQU | NASDAQ |
| QIAO XING MOBILE COMMUNICATI | F2A | IBIS |
| QIAO XING MOBILE COMMUNICATI | QXM | NYSE |
| QIAO XING UNIVERSAL RESOURCE | QXU | FWB |
| QIAO XING UNIVERSAL RESOURCE | NASDAQ | |
| RDA MICROELECTRON-SPON ADR | RDA | NASDAQ |
| RECON TECHNOLOGY LTD | HRC | FWB |
| RECON TECHNOLOGY LTD | RCON | NASDAQ |
| RENESOLA LTD-ADR | SOL | NYSE |
| SANCON RESOURCES RECOVERY IN | FTVA | SWB |
| SEARCHMEDIA HOLDINGS LTD | IDI | AMEX |
| SEARCHMEDIA HOLDINGS LTD-UTS | IDI U | AMEX |
| SGOCO GROUP LTD | SGOC | NASDAQ |
| SHANGPHARMA CORP-ADR | SHP | NYSE |
| SHENGTAI PHARMACEUTICAL INC | ESZ | SWB |
| SINA CORP | YIN | FWB |
| SINO GAS & ENERGY HOLDINGS L | SEH | ASX |
| SINO GAS INTERNATIONAL HOLDI | QGS | SWB |
| SINOBIOMED INC | G8U | FWB |
| SINOHUB INC | 7S3 | FWB |
| SINOTECH ENERGY LTD-SPON ADR | CTE | NASDAQ |
| SINOVAC BIOTECH LTD | SVQ | FWB |
| SINOVAC BIOTECH LTD | SVA | NASDAQ |
| SKY DIGITAL STORES CORP | YN3 | FWB |
| SKY-MOBI LTD-SP ADR | MOBI | NASDAQ |
| SKYSTAR BIO-PHARMACEUTICAL | GNJC | FWB |
| SOHU.COM INC | XOU | FWB |
| SUNTECH POWER HOLDINGS-ADR | STP | NYSE |
| SYSWIN INC-SPON ADS | SYSW | NYSE |
| TAL EDUCATION GROUP- ADR | XRS | NYSE |
| TAOMEE HOLDINGS LTD-SP ADR | TAOM | NYSE |
| TELESTONE TECHNOLOGIES CORP | MSOA | FWB |
| THE9 LTD-ADR | NCTY | NASDAQ |
| TIANLI AGRITECH INC | 7TA | FWB |
| TIANLI AGRITECH INC | OINK | NASDAQ |
| TIBET PHARMACEUTICALS INC | TXP | SWB |
| TIBET PHARMACEUTICALS INC | TBET | NASDAQ |
| TRINA SOLAR LTD-SPON ADR | TSL | NYSE |
| TRI-TECH HOLDING INC | TTW | FWB |
| TRI-TECH HOLDING INC | TRIT | NASDAQ |
| TRUNKBOW INTERNATIONAL HOLDI | TBJ | IBIS |
| TRUNKBOW INTERNATIONAL HOLDI | TBOW | NASDAQ |
| U.S. CHINA MINING GROUP INC | RJ2B | SWB |
| UTSTARCOM INC | UTS | FWB |
| UTSTARCOM INC | UTSI | NASDAQ |
| UTSTARCOM INC | UTSI | MEXI |
| VIMICRO INTERNATIONAL CO-ADR | VIMC | NASDAQ |
| VISIONCHINA MEDIA INC-ADR | VISN | NASDAQ |
| WSP HOLDINGS LTD-ADR | WH | NYSE |
| XINHUA CHINA LTD | X5R | IBIS |
| XINYINHAI TECHNOLOGY LTD | 3XI | SWB |
| XINYUAN REAL ESTATE CO L-ADR | XIN | NYSE |
| YAYI INTERNATIONAL INC | 8YJ | SWB |
| YINGLI GREEN ENERGY HOLD-ADR | YGE | NYSE |
| YOUKU.COM INC-SPON ADR | YOKU | NYSE |
| YUCHENG TECHNOLOGIES LTD | YCT | SWB |
| YUCHENG TECHNOLOGIES LTD | YTEC | NASDAQ |
| ZHENG HE GLOBAL CAPITAL LTD | ZHE | ASX |
| ZHONGPIN INC | CWP | FWB |
| ZOOM TECHNOLOGIES INC | ZT2A | FWB |
| ZUOAN FASHION LTD-SPON ADR | ZA | NYSE |
Overview of SEC Fees
Under Section 31 of the Securities Exchange Act of 1934, U.S. national securities exchanges are obligated to pay transaction fees to the SEC based on the volume of securities that are sold on their markets. Exchange rules require their broker-dealer members to pay a share of these fees who, in turn, pass the responsibility of paying the fees to their customers.
This fee is intended to allow the SEC to recover costs associated with its supervision and regulation of the U.S. securities markets and securities professionals. It applies to stocks, options and single stock futures (on a round turn basis); however, IB does not pass on the fee in the case of stock trades executed under the flat rate plan nor single stock futures trades. Note that this fee is assessed only to the sale side of security transactions, thereby applying to the grantor of an option (fee based upon the option premium received at time of sale) and the exerciser of a put or call assignee (fee based upon option strike price).
As of the start of fiscal year 2011 the fee was assessed at a rate of $0.0000192 per $1.00 of sales proceeds, however, the rate is subject to annual and,in some cases, mid-year adjustments should realized transaction volume generate fees sufficiently below or in excess of targeted funding levels.1
Examples of the transactions impacted by this fee and sample calculations are outlined in the table below.
|
Transaction |
Subject to Fee? |
Example |
Calculation |
|
Stock Purchase |
No |
N/A |
N/A |
|
Stock Sale (cost plus commission option) |
Yes |
Sell 1,000 shares MSFT@ $25.87 |
$0.0000192 * $25.87 * 1,000 = $0.496704 |
|
Call Purchase |
No |
N/A |
N/A |
|
Put Purchase |
No |
N/A |
N/A |
|
Call Sale |
Yes |
Sell 10 MSFT June ’11 $25 calls @ $1.17 |
$0.0000192 * $1.17 * 100 * 10 = $0.022464 |
|
Put Sale |
Yes |
Sell 10 MSFT June ’11 $25 puts @ $0.41 |
$0.0000192 * $0.41 * 100 * 10 = $0.007872 |
|
Call Exercise |
No |
N/A |
N/A |
|
Put Exercise |
Yes |
Exercise of 10 MSFT June ’11 $25 puts |
$0.0000192 * $25.00 * 100 * 10 = $0.48 |
|
Call Assignment |
Yes |
Assignment of 10 MSFT June ’11 $25 calls |
$0.0000192 * $25.00 * 100 * 10 = $0.48 |
|
Put Assignment |
No |
N/A |
N/A |
1Information regarding current Section 31 fees may be found on the SEC's Frequently Requested Documents page located at: http://www.sec.gov/divisions/marketreg/mrfreqreq.shtml#feerate
FAQs - U.S. Securities Option Expiration
Overview:
The following page has been created in attempt to assist traders by providing answers to frequently asked questions related to US security option expiration, exercise, and assignment. Please feel free to contact us if your question is not addressed on this page or to request the addition of a question and answer.
Click on a question in the table of contents to jump to the question in this document.
Table Of Contents:
How do I provide exercise instructions?
Do I have to notify IB if I want my long option exercised?
What if I have a long option which I do not want exercised?
What can I do to prevent the assignment of a short option?
Is it possible for a short option which is in-the-money not to be assigned?
Am I charged a commission for exercise or assignments?
Q&A:
How do I provide exercise instructions?
Instructions are to be entered through the TWS Option Exercise window. Procedures for exercising an option using the IB Trader Workstation can be found in the TWS User's Guide.
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Important Note: In the event that an option exercise cannot be submitted via the TWS, an option exercise request with all pertinent details (including option symbol, account number and exact quantity), should be created in a ticket via the Account Management window. In the Account Management window, click on "Inquiry/Problem Ticket". The ticket should include the words "Option Exercise Request" in the subject line. Please provide a contact number and clearly state in your ticket why the TWS Option Exercise window was not available for use.
Do I have to notify IB if I want my long option exercised?
In the case of exchange listed U.S. securities options, the clearinghouse (OCC) will automatically exercise all cash and physically settled options which are in-the-money by at least $0.01 at expiration (e.g., a call option having a strike price of $25.00 will be automatically exercised if the stock price is $25.01 or more and a put option having a strike price of $25.00 will be automatically exercised if the stock price is $24.99 or less). In accordance with this process, referred to as exercise by exception, account holders are not required to provide IB with instructions to exercise any long options which are in-the-money by at least $0.01 at expiration.
Important Note: in certain situations (e.g., underlying stock halt, corporate action), OCC may elect to remove a particular class of options from the exercise by exception process, thereby requiring the account holder to provide positive notice of their intent to exercise their long option contracts regardless of the extent they may be in-the-money. In these situations, IB will make every effort to provide advance notice to the account holder of their obligation to respond, however, account holders purchasing such options on the last day of trading are not likely to be afforded any notice.
What if I have a long option which I do not want exercised?
If a long option is not in-the-money by at least $0.01 at expiration it will not be automatically exercised by OCC. If it is in-the-money by at least that amount and you do not wish to have it exercised, you would need to provide IB with contrary instructions to let the option lapse. These instructions would need to be entered through the TWS Option Exercise window prior to the deadline as stated on the IB website.
What can I do to prevent the assignment of a short option?
The only action one can take to prevent being assigned on a short option position is to buy back in the option prior to the close of trade on its last trading day (for equity options this is usually the Friday preceding the expiration date). When you sell an option, you provided the purchaser with the right to exercise which they generally will do if the option is in-the-money at expiration.
Is it possible for a short option which is in-the-money not to be assigned?
While is unlikely that holders of in-the-money long options will elect to let the option lapse without exercising them, certain holders may do so due to transaction costs or risk considerations. In conjunction with its expiration processing, OCC will assign option exercises to short position holders via a random lottery process which, in turn, is applied by brokers to their customer accounts. It is possible through these random processes that short positions in your account be part of those which were not assigned.
Can IB exercise the out-of-the-money long leg of my spread position only if my in-the-money short leg is assigned?
No. There is no provision for issuing conditional exercise instructions to OCC. OCC determines the assignment of options based upon a random process which is initiated only after the deadline for submitting all exercise instructions has ended. In order to avoid the delivery of a long or short underlying stock position when only the short leg of an option spread is in-the-money at expiration, the account holder would need to either close out that short position or consider exercising an at-the-money long option.
What happens to my long stock position if a short option which is part of a covered write is assigned?
If the short call leg of a covered write position is assigned, the long stock position will be applied to satisfy the stock delivery obligation on the short call. The price at which that long stock position will be closed out is equal to the short call option strike price.
Am I charged a commission for exercise or assignments?
There is no commissions charged as the result of the delivery of a long or short position resulting from option exercise or assignment of a U.S. security option (note that this is not always the case for non-U.S. options).
What happens if I am unable to meet the margin requirement on a stock delivery resulting from an option exercise or assignment?
If an option exercise or assignment results in the delivery of a long or short stock position and the account holder does not maintain sufficient equity to meet the ensuing margin requirement, IB will act to liquidate positions to restore margin compliance. While IB retains the right to liquidate at any time in such situations, liquidations involving U.S. security positions will typically begin at approximately 9:40 AM ET as of the business day following expiration.
Non-Guaranteed Combination Orders
A combination order is a special type of order that is constructed of multiple separate positions, or ‘legs’, but executed as a single transaction. The legs of the combination may be comprised of the same position type (e.g. stock vs. stock, option vs. option or SSF vs. SSF) or different position types (e.g. stock vs. option, SSF vs. option or EFP). It’s important to note that many combination order types, while submitted via the IB trading platform as a combination, are not native to (i.e., supported by) the exchanges and therefore may not be guaranteed by IB. Accordingly, IB’s policy is to guarantee only Smart-Routed U.S. stock vs. option and option vs. option combination orders.
As combination orders which are not guaranteed are exposed to the risk of partial execution, both in terms of the quantity of legs and their balance, IB requires account holders to acknowledge the 'Non-Guaranteed' attribute at the point of order entry. There are two methods for setting this attribute:
- Method 1 - Users can select the Non-Guaranteed attribute in the Misc. section on the Order Ticket for a particular order
- Method 2 - Users can add the Non-Guaranteed column to the Order Management section of the TWS
Notes:
- Non-Guaranteed combination orders are not available for Financial Advisor allocation orders
The risk of such 'Non-Guaranteed' orders is illustrated through the example below:
Example
Assume the following quotes for a Stock vs. Stock combination order to purchase shares of Microsoft (MSFT) and sell shares of Appl (AAPL).
Current markets
MSFT - 26.30 bid, 26.31 offer
AAPL - 250.25 bid, 250.30 offer
A generic combination is created to buy 1 share AAPL and sell 1 share MSFT, the implied quote would be 223.94 bid, 224 offer.
The following order is entered:
Buy 200 AAPL, Sell 200 MSFT
Pay 224
Based on the current markets, the order would appear to be executable.
- A buy of 200 shares of AAPL are routed with a 250.30 limit. Only 100 execute.
- A sell of 200 shares of MSFT are routed with a 26.30 limit. No execution is received as the market moves to 26.29 bid.
With a Non-Guaranteed combination, the 100 shares of AAPL would be placed in the client account, even though no MSFT shares were executed. The remainder of the combination order will continue to work until executed in its entirety or until it is canceled.
TWS Messages - Order quantity must be fully displayed for this instrument
Order types which provide privacy by either hiding the entire order quantity (i.e., Hidden Orders) or allowing the display of only a specified portion of the submitted order quantity (i.e., Iceberg/Reserves) are not supported for all product types and venues.
Examples of venues for which Hidden and Iceberg/Reserve stock orders are not supported are Pink Sheet and OTCBB. Hidden or Iceberg/Reserve orders submitted to these venues will be rejected and will generate the following message: "Order quantity must be fully displayed for this instrument". Orders receiving this rejection message will require the removal of any hidden or display size attribute prior to resubmission.
Additional information regarding product types and venues for which these order types are supported is available through the links below:
Iceberg/Reserve:
http://individuals.interactivebrokers.com/en/trading/orders/iceberg.php?ib_entity=llc
Hidden :
http://individuals.interactivebrokers.com/en/trading/orders/hidden.php?ib_entity=llc
Equity & Index Option Position Limits
Overview:
Equity option exchanges define position limits for designated equity options classes. These limits define position quantity limitations in terms of the equivalent number of underlying shares (described below) which cannot be exceeded at any time on either the bullish or bearish side of the market. Account positions in excess of defined position limits may be subject to trade restriction or liquidation at any time without prior notification.
Background:
Position limits are defined on regulatory websites and may change periodically. Some contracts also have near-term limit requirements (near-term position limits are applied to the side of the market for those contracts that are in the closest expiring month issued). Traders are responsible for monitoring their positions as well as the defined limit quantities to ensure compliance. The following information defines how position limits are calculated;
Option position limits are determined as follows:
- Bullish market direction -- long call & short put positions are aggregated and quantified in terms of equivalent shares of stock.
- Bearish market direction -- long put & short call positions are aggregated and quantified in terms of equivalent shares of stock.
The following examples, using the 25,000 option contract limit, illustrate the operation of position limits:
- Customer A, who is long 25,000 XYZ calls, may at the same time be short 25,000 XYZ calls, since long and short positions in the same class of options (i.e., in calls only or in puts only) are on opposite sides of the market and are not aggregated
- Customer B, who is long 25,000 XYZ calls, may at the same time be long 25,000 XYZ puts. Rule 4.11 does not require the aggregation of long call and long put (or short call and short put) positions, since they are on opposite sides of the market.
- Customer C, who is long 20,000 XYZ calls, may not at the same time be short more than 5,000 XYZ puts, since the 25,000 contract limit applies to the aggregate position of long calls and short puts in options covering the same underlying security. Similarly, if Customer C is also short 20,000 XYZ calls, he may not at the same time have a long position of more than 5,000 XYZ puts, since the 25,000 contract limit applies separately to the aggregation of short call and long put positions in options covering the same underlying security.
Notifications and restrictions:
IB will send notifications to customers regarding the option position limits at the following times:
- When a client exceeds 70% of the allowed limit IB will send a notification indicating this threshold has been exceeded
- When a client exceeds 95% of the allowed limit IB will place the account in closing only. This state will be maintained until the account falls below 70% of the allowed limit. New orders placed that would increase the position will be rejected.
Notes:
Position limits are set on the long and short side of the market separately (and not netted out).
Traders can use an underlying stock position as a "hedge" if they are over the limit on the long or short side (index options are reviewed on a case by case basis for purposes of determining which securities constitute a hedge).
Position information is aggregated across related accounts and accounts under common control.
Definition of related accounts:
IB considers related accounts to be any account in which an individual may be viewed as having influence over trading decisions. This includes, but is not limited to, aggregating an advisor sub-account with the advisor's account (and accounts under common control), joint accounts with individual accounts for the joint parties and organization accounts (where an individual is listed as an officer or trader) with other accounts for that individual.
Position limit exceptions:
Regulations permit clients to exceed a position limit if the positions under common control are hedged positions as specified by the relevant exchange. In general the hedges permitted by the US regulators that are recognized in the IB system include outright stock position hedges, conversions, reverse conversions and box spreads. Currently collar and reverse collar strategies are not supported hedges in the IB system. For more detail about the permissible hedge exemptions refer to the rules of the self regulatory organization for the relevant product.
OCC posts position limits defined by the option exchanges. They can be found here.
http://www.optionsclearing.com/webapps/position-limits
