Understanding interest charges when the net cash balance is a credit

An account will be subject to interest charges despite maintaining an overall net long or credit cash balance under the following circumstances: 

1. The account maintains a short or debit balance in a given currency.

For example, an account maintaining a net cash credit balance equivalent to USD 5,000 comprised of a long USD balance of 8,000 and a short EUR balance equivalent to USD 3,000 would be subject to an interest debit based upon the short EUR balance.  There would be no offsetting credit on the long USD balance as it is less than the USD 10,000 Tier I level above which interest is earned.  

Account holders should note that in the event they purchase a security which is denominated in a currency that they do not hold in their account, IBKR will create a loan in that currency in order to settle the trade with the clearinghouse. If one wishes to avoid such loans and their associated interest charges, they would need to either deposit funds denominated in that particular currency or convert existing cash balances via the Ideal Pro (for balances of USD 25,000 or above) or odd lot (for balances less than USD 25,000) venue prior to entering into your trade. 

2. The credit balance is comprised  principally of proceeds from the short sale of securities. 

For example, an account maintaining a net cash credit balance of USD 12,000 which is comprised of a USD debit of 6,000 in the security sub-account (less the market value of any short stock positions) and a short stock market value credit of USD 18,000 would be charged interest on the Tier 1 debit of USD 6,000 and would earn no interest on the short stock credit as it falls below the USD 100,000 Tier I level.

3. The credit balance includes unsettled funds.

IBKR determines interest debits and credits solely based upon settled funds. Just as an account holder is not assessed interest charges on funds borrowed to purchase a security until such time that purchase transaction settles, the account holder will not receive an interest credit, or offset against a debit balance, on funds originating from the sale of a security until such time the transaction has settled (and IBKR has been credited funds by the clearinghouse).

 

If I change my address with IB, will my billing address be automatically changed for my direct billed NYSE Professional market data subscription?

 

No. The subscriber must change the updated address directly with the NYSE through their website located at www.nyxdata.com/mds. Once on the NYSE website, the subscriber will need to click on Account Profile Change link located under the Account Information Changes menu.

Does IBKR provide for a dormant or inactive account status?

As the IBKR business model, by design, is oriented towards active traders, there is no provision for dormant or inactive account status. As long as an account remains funded it will be subject to the monthly minimum activity fee of USD 10 if the account balance is above USD 2,000 (or equivalent) and USD 20 once the account balance falls below USD 2,000 (this minimum activity fee is set at USD 3 for account holders age 25 and under). Also, should the account balance fall below USD 2,000 IBKR is precluded, by regulation, from affording margin treatment to securities positions. In addition, account holders will also be billed for any market data subscriptions maintained and, as a matter of policy, will have subscriptions terminated automatically when the account balance falls below USD 500.

Also note that the monthly minimum activity fee will continue to be assessed until such time the account no longer has equity, at which point it will be automatically closed. Should funds be transferred back into the account, thereby reopening the account, the monthly activity fee will once again be assessed.

Individuals seeking to close an account are encouraged to refer to our User's Guide to familiarize themselves with the steps and prerequisites for taking this action.

Add/Remove Liquidity

Overview: 

The goal of this article is to provide proper understanding of exchange fees and add/remove liquidity fees for the Tiered commission schedule.

 

The concept of adding or removing liquidity is applicable to both stocks and stock/index options. Whether or not an order removes or adds liquidity is dependent on that order being marketable or non-marketable.

Marketable orders REMOVE liquidity.
Marketable orders are either market orders, OR buy/sell limit orders whose limit is at or above/below the current market.

1. For a marketable buy limit order, the limit price is at or above the Ask.

2. For a marketable sell limit order, the limit price is at or below the Bid.

Example:
XYZ’s stock current ASK (offer) size/price is 400 shrs at 46.00. You enter a buy limit order for 100 XYZ stock @ 46.01. This order will be considered marketable because an immediate execution will take place. If there is an exchange charge for removing liquidity, the customer will be charged that fee.


 

Non-Marketable orders ADD liquidity.
Non-marketable orders are buy/sell limit orders in which the limit price is below/above the current market.

1. For a non-marketable buy limit order, the limit price is below the Ask.

2. For a non-marketable sell limit order, the limit price is above the Bid.

Example:
XYZ’s stock current ASK (offer) size/price is 400 shrs at 46.00. You enter a buy limit order for 100 XYZ stock @ 45.99. This order will be considered non-marketable, because it will be posted to the market as the best bid, and instead of being immediately executed.
If and when someone else sends a marketable sell order that causes your buy limit order to be executed, you should receive a rebate (credit), if an add liquidity credit is available.
 
 

PLEASE NOTE:
1. All accounts trading options will be subject to any options exchanges’ remove/add liquidity fees or credits.
2. Per IBKR’s website, only negative numbers under the Remove/Add Liquidity schedules are rebates (credits).
 
For more information visit:

What is the meaning of removing from, or adding liquidity to, the market?

Overview: 

The first point to understand is what a marketable order is.  Marketable orders are either market orders or buy and sell limit orders whose limit price is at or above/below the current market price.  A marketable buy limit order would have a limit price set at or above the current ask in the market.  Conversely, a marketable sell limit order would have a limit price set at or below the current bid in the market. 

Marketable orders remove liquidity from the market. 

Non-marketable orders are buy and sell limit orders in which the limit price is below/above the current market price.  A non-marketable buy limit order would have a limit price that is below the current ask in the market.  Conversely, a non-marketable sell limit order would have a limit price that is above the current bid in the market. 

Non-marketable orders add liquidity to the market.

Why am I receiving notifications concerning the number of messages being sent to the CME’s Globex trading platform?

 

Based upon the premise that the Globex platform is negatively affected when clients send excessive messages (e.g., orders, modifies and cancels) that do not provide market value, the CME imposes monetary penalties upon clearing members submitting orders on behalf of its clients in excess of benchmark volume ratios for a given product.   IBKR, in turn, maintains the right to pass these charges on to clients and will send a warning message when a violation appears imminent. Clients who receive this notice and continue to send excessive messages may be subject to surcharge fee of $2,000 each time a product benchmark is violated. Additional information regarding the CME Globex messaging policy can be found on the CME Group web site. 

How do I change the fees which I charge my clients?

Overview: 

Advisor accounts have the ability to configure the fees which they assess to their clients.

Information:

The procedure for changing fees for a client account is as follows. You must log in to Advisor Portal and select Manage Clients -> Fees -> Configure. You will need to change the fees in this section online, but you still must have the client sign the fee change form and submit to us for processing.

Please see the Advisor Client Fees page for additional information, such as the available billing methods and the fee caps currently in place.

What timeframe of activity statements is made available online and how can archived statements be obtained?

Overview: 

Daily activity statements for the past 4 years are available online through Client Portal. Monthly activity statements for the past 60 months and annual statements for the past 5 years are also available. Statements are available for an additional 2 years beyond this and are available in electronic format only (delivered via email) at the following cost:

  • Statements 6 to 7 years old the cost will be USD 25.00 for the first statement + USD 5.00 for each additional statement

Note: IBKR does not typically provide daily statements in lieu of monthly or annual statements.

Payment may be made in the form of check, or in the case of active accounts a debit to the account cash balance.  Requests for archived statements may be made via web ticket and checks are to be mailed to Interactive Brokers, Attn: Funds & Banking, 209 S La Salle St. Suite 1000, Chicago, IL 60604 USA

Background: 

IMPORTANT NOTE

Cashier’s Checks, Official Checks, Teller’s Checks and Banker’s checks issued by banks are the recommended forms of payment.  Personal checks and checks issued by a credit union or bill payment service are subject to a seven business day hold period, after which the requested statements will be issued.

My account was debited for a dividend payment (Payment in Lieu) for a short stock position which I don’t recognize. How did this occur?

Overview: 

 

A short stock position may originate from an option position which you held in your account.  For example, if you hold a long put position in your account, that position may be subject to automatic exercise by the clearinghouse if it is in-the-money by a defined threshold at expiration.  This put exercise will generate a short stock position in your account (assuming you do not have an offsetting long position), and you are obligated to pay any dividends should you maintain a short stock position on the ex-dividend date. 

 

Similarly, a short call position in your account is subject to assignment should a call purchaser elect to exercise their right to purchase the stock and your account be allocated through the random clearinghouse and broker assignment process.  This call assignment will generate a short stock position in your account (assuming you do not have an offsetting long position), and you are obligated to pay any dividends should you maintain a short stock position on the ex-dividend date. 

 

These payments will be reflected on your Activity Statement as a 'Payment In Lieu Of Dividend'.

What does Payment in Lieu refer to?

Overview: 

A Payment in Lieu, or Pil, typically refers to a cash debit or credit made to an account in recognition of a stock dividend.  A Pil in the form of a debit will be made when an account is holding a short position in a stock on its ex-dividend date. This debit occurs as the lender of the shares which facilitated the short sale remains entitled to all dividends paid throughout the duration of the loan period.   

Conversely, a Pil in the form of a credit is made when a long stock position in an account has been loaned out on its ex-dividend date.  Account holders should note that shares which are held long and which are the subject of a margin lien may be eligible to be loaned by the broker.  In this situation the credit originates from payment by the borrower of the shares rather than from a dividend by the share issuer.   U.S. taxpayers who are recipients of Pil credits should discuss the tax implications of Pils and non-qualified dividends with their tax adviser.

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