I remember during market crashes in the past, Interactive Brokers (IB) increased the margin for many products.There was a lot of complaining about it on certain forums but I personally was happy to see the increased margins. As an IB customer myself, I like knowing rogue traders with too much risk are not going to destroy the brokerage firm with my funds in it. It's happened before to other brokers and I trust IB to keep risk under control.
It's no surprise to anyone that the British referendum to leave the EU (BREXIT) is on Thursday, June 23, 2016. The markets are extremely uneasy about this important vote and volatility has exploded in the past week. To keep risk to IB under control, IB sent a notice today that they are increasing margin for certain products conntected to the Brexit vote. Here's the mail they sent out:
IMPORTANT RISK NOTICE: BREXIT Margin Increases for GBP, EUR and UK linked products
On 23 June 2016, the UK will vote on a referendum (i.e., BrExit) to decide whether to remain a part of the European Union. This vote is expected to create substantial market volatility in the days leading up to the vote and perhaps even greater volatility should the final vote be for the UK to separate from the EU. The market consensus suggests that separation would lead to a weaker GBP, lower equity prices in the short term, and a possible secondary adverse effect on the EUR due to the precedent setting event of a country leaving the EU.
In anticipation of this volatility, Interactive Brokers will be increasing margin across a range of products, as follows:
- GBP currency/assets: maintenance margin 7.5% (now 2.5%), initial margin 12% (now 9%)
- EUR currency/assets: maintenance margin 5% (now 3.0%), initial margin 5% (now 4%)
- GBP/EUR currency futures: same margins as for spot FX above
- GBP/EUR currency options: scanning range for maintenance margin will increase to 7%.
- FTSE index derivatives: scanning range for maintenance margin will increase from 5.6% to 8%
- GBP denominated stocks: portfolio margin maintenance of 20% (already in place)
- CFDs on GBP denominated stocks: same as the underlying stock
- UK linked stocks (for example, ADRs on UK stocks: portfolio margin maintenance will increase to 20%
These changes will be going in over the next 4 business days with the increases to initial margins occurring first. We urge all clients with substantial positions in products that are considered exposed to the BrExit vote and, in particular those with net short option positions, to prepare for substantially higher upcoming margin requirements and adjust their risk and/or capital positions accordingly.
Interactive Brokers Client Services
