Interactive Brokers Increases Margin Requirements Ahead of 2022 US Elections – Key Updates & Rates

Interactive Brokers (IBKR) has announced a strategic increase in margin requirements to carefully control leverage as the United States approaches the November 2022 elections.

Clients received notifications detailing that initial margin requirements will rise from the typical 50% minimum to as high as 67.5% starting September 28 through October 23. Maintenance margin requirements will similarly increase, moving from 25% up to 33.75% between October 5 and October 30. These adjustments will be updated daily after the New York market closes and take effect the following trading day.

For context, the initial margin is the portion of a security’s purchase price that must be paid with cash or collateral when trading on margin. While the Federal Reserve Board’s Regulation T sets a minimum initial margin of 50%, brokerage firms like Interactive Brokers often impose higher requirements to mitigate risk. Margin accounts essentially function as lines of credit, with interest charged on the borrowed balance.

Interactive Brokers: A Leading Margin Loan Provider

IBKR is among the world’s largest margin lenders, offering some of the lowest interest rates in the industry. As of June 30, 2020, the firm reported approximately $25.7 billion in outstanding customer margin loans. Current margin interest rates in the U.S. range from 0.75% to 2.59%. In 2020, Investopedia recognized Interactive Brokers as the top broker for international trading, day trading, and low margin rates.

In April 2020, IBKR faced a notable loss of around $88 million following the unprecedented plunge of West Texas Intermediate crude oil prices into negative territory. The firm covered margin settlements on behalf of clients whose losses exceeded their account equity, underscoring its commitment to risk management.

The recent email from Interactive Brokers also mentioned the possibility of further margin adjustments based on market volatility, including changes to their standard margin model and potential new house margin requirements.

Ongoing Evaluation and Market Responsiveness

Steve Sanders from Interactive Brokers emphasized that the firm continually assesses market conditions, with margin policies reflecting these evaluations. Although no formal press release was issued, the firm’s margin agreement allows for requesting additional collateral or liquidating securities to maintain account health.

Industry Perspective: How Other Brokers Are Responding

Currently, Interactive Brokers stands as the sole major brokerage implementing margin requirement changes in response to election-related volatility. This move follows their experience with margin losses earlier in the year.

Other brokers have maintained their existing margin policies. Tom Sosnoff of tastyworks stated, "We have not changed our requirements and have no plans to do so." Rosaline McNeil from SogoTrade echoed this, saying, "We will not be making any changes at this time." Shawn Herrin of eOption noted that adjustments are made selectively based on individual securities, particularly volatile sectors like biotech.

Joe Ely of Lightspeed highlighted their dynamic risk management approach, adjusting margin requirements at the account or symbol level to avoid broad policy changes. Jeff Peters from TradeStation confirmed no immediate margin policy changes but stressed readiness to act if market conditions demand.

At Charles Schwab, Jeff Chiappetta explained their conservative margin stance, which reduces the need for drastic changes ahead of predictable events like elections. Ally Invest also monitors volatility closely but has no plans for sweeping margin adjustments currently.

Stay informed on margin requirement updates and market risk management strategies by following trusted brokerage communications and financial news sources.

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