Charges to Accounts with Worst-Case Loss Exposure
Dear Client,
As part of its risk management policy, IBKR routinely stress tests client portfolios to evaluate their exposure to various market scenarios. These scenarios typically consider events such as price changes and option implied volatility shifts that are more extreme than those covered by regulatory margin requirements and may therefore project "worst-case" losses in excess of margin deposits.
These stress tests not only serve as a monitoring tool but also form the basis for assessing a daily "Exposure Fee" to those accounts reporting an average loss. This is intended to protect IBKR and its other customers from accounts maintaining portfolios which, while currently margin compliant, would not have sufficient equity to satisfy losses were the worst-case loss to occur. The "Exposure Fee" is calculated on an account by account basis. If a client maintains multiple accounts that are considered "related and/or liked-owned", IBKR may combine those portfolios for the purpose of determining the Exposure Fee to be applied for those account. IBKR will calculate the Exposure Fee for all calendar days and charged to accounts the following trading day. The Exposure Fee charged on Monday's activity statement will reflect the charges for Friday, Saturday and Sunday. Exposure Fee calculation periods which include a holiday will be determined in the same manner as that of a weekend.
While your account AAAAAAA, is currently not subject to this fee, your exposure is now at a level that, were the fee to be charged, it would total ZZZ per day. Details regarding this fee are provided in the table below.
DAILY EXPOSURE FEE SUMMARY
Risk Factor1 Average Exposure2 Account Equity
Risk Factor Exposure Fee3 Fee Implementation Date
Equity Stocks and Indices
XXXXXX
YYYYYY
ZZZ
July 23, 2024
Total ZZZ
1 Risk Factor is defined by an index or ETF representing a sector, currency, or an individual stock. Accounts may have an Average Exposure and a corresponding Exposure Fee for more than one Risk Factor.
2 Calculated by averaging the unsecured debt (loss in excess of equity) over the number of scenarios specific to each Risk Factor.
3 Determined through the use of a proprietary algorithm.
Please note that while this fee is not being charged at this time, your account will become subject to it effective as of the date(s) noted above. Starting then and every day thereafter, your end-of-day portfolio will be subject to the aforementioned stress tests and should your Average Exposure exceed your accounts equity, a fee will be assessed and reported on your daily activity statement.
It's important to note that account holders have the ability to eliminate or reduce this fee through a combination of the following:
Increasing account equity.
A highly concentrated single stock position(s) exposes the account to significant risk exposure. Diversification and hedging may possibly reduce exposure.
Reducing the exposure by repurchasing short positions in options. We have found that short positions in cheap options generate the largest exposures relative to capital. You can use the Risk Navigator to simulate the effects of changes in your portfolio.
Again, the amount above is not being charged at this time. To avoid charges for carrying positions that have a loss far greater in the worst case than the capital of your account, we urge you to examine ways to reduce your exposure prior to the implementation date(s) noted in the table above. Additional information regarding this fee and tools for managing the fee in knowledge base articles on Exposure Fee Calculation Reports and Exposure Fee Calculations Overview.
Interactive Brokers