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Exposure Fee for High Risk Accounts

 

 

Our clearing firm, Interactive Brokers (IB), imposes a daily "Exposure Fee" on a small minority of customer accounts that have a very high worst-case loss risk exposure. This is to protect the firm and its customers from those accounts that have very risky positions that currently satisfy exchange margin requirements, but nonetheless could suffer excessive losses in the event of a significant market move (for example, accounts with high exposure to short option positions).

 

Exposure Fees only apply to a small minority of customer accounts with unusually risky positions. Most accounts are not subject to these fees. The exposure fee is not a higher margin requirement. It is a fee to be deducted from affected accounts to compensate IB for the risk in servicing such accounts. (Place Trade is not compensated for this fee and is not able to make changes to our clearing firm's rules regarding this fee. 

 

Each day, as part of its risk management policy, IB simulates profit-loss scenarios for client portfolios based on hypothetical market movements of certain magnitudes ("Exposure Analysis"). The scenarios examined may exceed the parameters used by various exchanges for determination of minimum margin requirements.

 

As part of this daily process, IB will calculate an Exposure Fee to be charged to high-risk accounts based on the potential exposure the account represents to the firm in the event of a major loss. Under the Exposure Analysis conducted by IB, if an account would lose so much value that its equity would be eliminated and it would then additionally have an unsecured debt to the firm (i.e., negative equity), this would represent an Exposure to the firm (since the firm is legally obligated to guarantee its customers’ performance to the clearinghouse even if the customer has no remaining equity).

 

The Exposure Fee will be calculated for each weekday and charged to the account at the end of the following day. The results of the Exposure Analysis relating to the Exposure Fee will be made available for each account via the Account Management section of our website.

 

Please note the following:

 

  • Interactive Brokers will calculate the Exposure Fee in its own discretion and using its own proprietary algorithms (which are subject to change without notice) to determine the exposure that an account poses to the firm.
  • The Exposure Fee may change each day based on market movements, changes in the account’s portfolio, or changes in the formulas and algorithms IB utilizes to determine the riskiness of the account.
  • The Exposure Fee will be deducted from affected accounts on a daily basis. You should keep excess capital in your account to cover the fee if your account will be affected. If deduction of the fee causes a margin deficiency, the account will be subject to liquidation of positions as specified in the Customer Agreement.
  • The Exposure Fee is judged separately account by account. If you have multiple accounts with offsetting risk exposures, you should combine them in order to reduce or avoid the Exposure Fee.

 

If you wish to avoid being charged an Exposure Fee, please consider the following:

 

  • Adding additional capital will improve the risk profile of your account and may reduce or eliminate the Exposure Fee;
  • Reducing the exposure in your account by repurchasing short positions in options may also reduce or eliminate the Exposure Fee. IB has found that short positions in low-priced options generate the largest exposures relative to capital. You can use the Risk Navigator to simulate the effects of changes in your portfolio.


Other Potential Fees

What are SEC fees?

For information regarding fees please call us at 1-919-719-7200.

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