IBKR Credit Rates and Short Sale Costs

IBKR Credit Rates

Client accounts may receive credit interest on long settled cash balances in their securities accounts.

Accounts with a Net Asset Value (NAV) of USD 100,000 (or equivalent) or more are paid interest at the full rate for which they are eligible. Accounts with NAV of less than USD 100,000 (or equivalent) receive interest at rates proportional to the size of the account.

For example, an account with a NAV of USD 50,000 earns credit interest at a rate equal to one-half the rate paid by IBKR to accounts with a NAV of USD 100,000 or more.

Interest accrues daily. IBKR posts the interest payments on a monthly basis on the third business day of the following month. IBKR uses a blended rate based on the tiers outlined in the table below. The tiers on which interest rates are based are subject to change without prior notification.

For balances held in JPY, or RUB, IBKR may apply an effective negative rate to long balances held. The negative rate applied to accounts holding these currencies is the same regardless of account size. For other currencies in which the effective rate is less than zero, the interest paid is 0%.

Please note that credit interest on accounts with Interactive Brokers Ireland Limited is generally subject to withholding tax at 20% of the interest amount paid. Exemptions and reductions are available to this requirement depending on a client’s legal status or country of tax residency.

CurrencyBM Rates as of 26/02/2024Benchmark (BM)Credit Interest p.a.
Flag us
USD
5.330%Reference Benchmark USD0 ≤ 10,000: 0.000%
> 10,000: 4.830%
Flag eu
EUR
3.898%Reference Benchmark EUR0 ≤ 10,000: 0.000%
> 10,000: 3.398%
Flag ae
AED
5.262%Reference Benchmark AED0 ≤ 35,000: 0.000%
> 35,000: 4.512%
Flag au
AUD
4.313%Reference Benchmark AUD0 ≤ 15,000: 0.000%
15,000 ≤ 150,000: 3.813%
> 150,000: 4.063%
Flag ca
CAD
4.880%Reference Benchmark CAD0 ≤ 13,000: 0.000%
> 13,000: 4.380%
Flag ch
CHF
1.503%Reference Benchmark CHF0 ≤ 10,000: 0.000%
> 10,000: 1.003%
Flag cn
CNH
3.051%Reference Benchmark CNH0 ≤ 70,000: 0.000%
> 70,000: 0.500%
Flag cz
CZK
6.112%Reference Benchmark CZK0 ≤ 250,000: 0.000%
> 250,000: 4.112%
Flag dk
DKK
3.483%Reference Benchmark DKK0 ≤ 75,000: 0.000%
> 75,000: 2.983%
Flag gb
GBP
5.189%Reference Benchmark GBP0 ≤ 8,000: 0.000%
> 8,000: 4.689%
Flag hk
HKD
3.792%Reference Benchmark HKD0 ≤ 78,000: 0.000%
> 78,000: 3.042%
Flag hu
HUF
9.800%Reference Benchmark HUF0 ≤ 3,500,000: 0.000%
> 3,500,000: 6.800%
Flag il
ILS
4.319%Reference Benchmark ILSAll: 0.000%
Flag in
INR
6.800%Reference Benchmark INRAll: 0.000%
Flag jp
JPY
-0.305%Reference Benchmark JPY0 ≤ 5,000,000: 0.000%
> 5,000,000: -0.555%
Flag kr
KRW
3.500%Reference Benchmark KRW0 ≤ 12,000,000: 0.000%
> 12,000,000: 2.000%
Flag mx
MXN
11.261%Reference Benchmark MXN0 ≤ 200,000: 0.000%
> 200,000: 7.261%
Flag no
NOK
4.434%Reference Benchmark NOK0 ≤ 100,000: 0.000%
> 100,000: 2.434%
Flag nz
NZD
5.121%Reference Benchmark NZD0 ≤ 15,000: 0.000%
> 15,000: 2.621%
Flag pl
PLN
5.640%Reference Benchmark PLN0 ≤ 400,000: 0.000%
> 400,000: 3.640%
Flag ru
RUB
15.750%Reference Benchmark RUB0 ≤ 750,000: -11.000%
> 750,000: -11.000%
Flag sa
SAR
5.683%Reference Benchmark SAR0 ≤ 35,000: 0.000%
> 35,000: 4.933%
Flag se
SEK
3.847%Reference Benchmark SEK0 ≤ 110,000: 0.000%
> 110,000: 3.347%
Flag sg
SGD
3.886%Reference Benchmark SGD0 ≤ 14,000: 0.000%
> 14,000: 2.886%
Flag tr
TRY
44.243%Reference Benchmark TRY0 ≤ 250,000: 0.000%
> 250,000: 5.000%
Flag za
ZAR
8.375%Reference Benchmark ZAR0 ≤ 150,000: 0.000%
> 150,000: 7.375%

There are two factors for daily cost/revenues associated with short selling of stocks and bonds at IBKR:

  • Borrow Fee
  • Short Sale Proceeds interest paid to you by IBKR

Borrow Fee

Costs for position borrowing of stocks with special considerations (for example hard to borrow instruments) are usually higher than for normal availability stocks. These additional costs will be passed on in the form of lower short stock credit interest. Please note that this may lead to a net debit short stock credit interest if the costs to borrow exceed the interest earned. In order to view the indicative short stock interest rates for a specific stock, IBKR recommends that clients use the Short Stock (SLB) Availability tool from the Support menu in Client Portal.

Short Sale Proceeds interest paid to you by IBKR

For the purposes of crediting interest on cash equal to short stock collateral values, only accounts with Net Asset Value (NAV) exceeding USD 100,000 will be eligible to receive credit interest on these cash balances.

For balances held in CHF, JPY, or RUB, IBKR may apply an effective negative rate to long balances held. The negative rate applied to accounts holding these currencies is the same regardless of account size. For other currencies in which the effective rate is less than zero, the interest paid is 0%.

CurrencyBenchmark (BM)BM Rates as of 26/02/2024Credit Interest p.a.
Flag us
USD
Reference Benchmark USD5.330%0 - 100,000: 0.000%
100,000.01 - 1,000,000: 4.080%
1,000,000.01 - 3,000,000: 4.830%
3,000,000.01 +: 5.080%
Flag eu
EUR
Reference Benchmark EUR3.898%0 - 90,000: 0.000%
90,000.01+: 1.648%
Flag au
AUD
Reference Benchmark AUD4.313%0 - 150,000: 0.000%
150,000.01 +: 2.063%
Flag ca
CAD
Reference Benchmark CAD4.880%0 - 130,000: 0.000%
130,000.01 - 1,300,000: 3.130%
1,300,000.01 - 3,000,000: 3.780%
3,000,000.01 +: 3.980%
Flag ch
CHF
Reference Benchmark CHF1.503%0 - 90,000: 0.000%
90,000.01 +: 0.000%
Flag gb
GBP
Reference Benchmark GBP5.189%0 - 80,000: 0.000%
80,000.01+: 2.939%
Flag hk
HKD
Reference Benchmark HKD3.792%0 - 780,000: 0.000%
780000.01: 1.542%
Flag mx
MXN
Reference Benchmark MXN11.261%0 - 2,000,000: 0.000%
2,000,000.01+: 7.261%
Flag se
SEK
Reference Benchmark SEK3.847%0 - 900,000: 0.000%
900,000.01+: 1.597%

IBKR’s benchmark for each currency is the reference rate around which our credit, debit, stock loan and other interest rate linked calculations are determined. IBKR uses a combination of internationally recognized reference rates (such Fed Funds), bank deposit rates, and dynamic interbank rates determined from foreign exchange and money markets to calculate an IBKR Reference Benchmark rate.

CurrencyBenchmark (BM)BM Rates as of 26/02/2024
Flag us
USD
Reference Benchmark USD5.330%
Flag eu
EUR
Reference Benchmark EUR3.898%
Flag ae
AED
Reference Benchmark AED5.262%
Flag au
AUD
Reference Benchmark AUD4.313%
Flag bg
BGN
Reference Benchmark BGN3.800%
Flag br
BRL
Reference Benchmark BRL11.150%
Flag ca
CAD
Reference Benchmark CAD4.880%
Flag ch
CHF
Reference Benchmark CHF1.503%
Flag cn
CNH
Reference Benchmark CNH3.051%
Flag cz
CZK
Reference Benchmark CZK6.112%
Flag dk
DKK
Reference Benchmark DKK3.483%
Flag gb
GBP
Reference Benchmark GBP5.189%
Flag hk
HKD
Reference Benchmark HKD3.792%
Flag hu
HUF
Reference Benchmark HUF9.800%
Flag il
ILS
Reference Benchmark ILS4.319%
Flag in
INR
Reference Benchmark INR6.800%
Flag jp
JPY
Reference Benchmark JPY-0.305%
Flag kr
KRW
Reference Benchmark KRW3.500%
Flag mx
MXN
Reference Benchmark MXN11.261%
Flag no
NOK
Reference Benchmark NOK4.434%
Flag nz
NZD
Reference Benchmark NZD5.121%
Flag pl
PLN
Reference Benchmark PLN5.640%
Flag ro
RON
Reference Benchmark RON5.910%
Flag ru
RUB
Reference Benchmark RUB15.750%
Flag sa
SAR
Reference Benchmark SAR5.683%
Flag se
SEK
Reference Benchmark SEK3.847%
Flag sg
SGD
Reference Benchmark SGD3.886%
Flag tr
TRY
Reference Benchmark TRY44.243%
Flag za
ZAR
Reference Benchmark ZAR8.375%

Methodology for Determining Effective Rates

BACKGROUND

In determining the interest that account holders are paid on cash credit balances and charged on debit balances, each currency is assigned an IBKR Reference Benchmark rate. The IBKR Reference Benchmark rate is determined from short-term market rates but capped above/below widely used external reference rates or, where appropriate, bank deposit rates. This page explains how IBKR Reference Benchmark rates are determined.

Reference Rates

Reference rates are determined using a three-step process. The rates are capped above/below traditional external reference rates. For currencies and IBKR affiliates where Forex swap market pricing does not affect the rates we pay and charge our customers, Step 1 is omitted from the final rate determination.

1. Market implied rates

For market pricing, we utilize short-term Forex swap markets. Since most of the transactions involve the US dollar, Forex swap prices of currencies vs. the US dollar are sampled over a pre-determined time period referred to as the “Fixing Time Window” that is intended to be representative of liquid trading hours and primary turnover. The specific swap tenor and fixing windows used depend on the currency. We use the best bid and ask from a group of up to 12 of the largest Forex dealing banks to calculate the implied non-USD short-term rates – generally Overnight (T/T+1), Tom Next (T+1/T+2) or Spot Next (T+2/T+3). At the Fixing Time Window close, these calculations are sorted with the lowest and highest rates disregarded and the remainder averaged to determine the market implied reference rate.

2. Traditional external benchmark reference rates

For traditional benchmarks, we utilize published reference rates and, where appropriate, bank deposit rates. These rates generally are determined by either bank survey or actual transactions. The Hong Kong Inter-Bank Offered Rate (HIBOR), for example, is determined by surveying a panel of banks for the rate at which they could borrow funds from other banks at a specific time each day. In contrast, the US dollar Fed Funds effective rate is calculated as the weighted average of interbank lending rates transacted in the Fed Funds market.

The reform on interest rate benchmarks (IBOR reform), launched in 2013 by the G20 nations and conducted by regulatory authorities and public and private sector working groups, is gradually replacing bank survey based rates with new transaction driven reference rates.

3. IBKR Reference Benchmark Rates

The final IBKR Reference Benchmark rates are then determined by using the market implied reference rate, as described in 1. above, but capped by a certain amount above/below the traditional external benchmark reference rate as described in 2. above. For currencies and IBKR affiliates where Forex swap market pricing is not relevant, the final IBKR Reference Benchmark rates are determined by using traditional benchmarks or bank deposit rates, capped as above. The caps can change at any time without explicit prior notice and are listed in the table below, along with relevant currency and benchmark reference rates.

Examples

a. Assume the market implied overnight rate for GBP is 0.55%. The Sterling Overnight Index Average (SONIA) reference rate is 0.65%. The effective rate is then equal to the market implied rate of 0.55%, as it is still within the 1.00% cap around the SONIA reference rate at 0.65%.

b. If, for example, the market implied rate for CNH was 4.5% but the overnight CNH reference rate for the same period was 1.0%, the effective rate would be capped at 2.0% above the CNH reference rate, or 3.0% (1.0% reference rate + 2.0% cap).

CurrencyBenchmark Description Cap Below1Cap Above1
USDFed Funds Effective (Overnight rate)0,00%0,00%
AEDEIBOR, Emirates Interbank Offered Rate3,00%3,00%
AUDRBA Daily Cash Rate Target1,00%1,00%
CADBank of Canada Overnight Lending Rate1,00%1,00%
CHFSwiss Average Rate Overnight (SARON)1,00%1,00%
CNY/CNHCNH HIBOR Overnight Fixing Rate (TMA)2,00%2,00%
CZKPrague ON Interbank Offered Rate1,00%1,00%
DKKDanish Tom/Next Index1,00%1,00%
EUREuro Short-Term Rate (€STR)1,00%1,00%
GBPSterling Overnight Index Average (SONIA)1,00%1,00%
HKDHKD HIBOR (Overnight rate)1,00%1,00%
HUFBudapest Interbank Offered Rate1,00%1,00%
ILSTel Aviv Interbank Offered O/N Rate1,00%1,00%
INRCentral Bank of India Base Rate0,00%0,00%
JPYTokyo Overnight Average Rate (TONAR)1,00%1,00%
KRWKorean Won KORIBOR (1 week)0,00%0,00%
MXNMexican Interbank TIIE (28 day rate)3,00%3,00%
NOKNorwegian Overnight Weighted Average1,00%1,00%
NZDNew Zealand Dollar Official Cash Daily Rate1,00%1,00%
PLNWIBOR (Warsaw Interbank Overnight Rate)1,00%1,00%
RUBRUONIA (Ruble Overnight Index Average)3,00%3,00%
SARSAIBOR Saudi Arabia Interbank Offered Rate3,00%3,00%
SEKSEK STIBOR (Overnight Rate)1,00%1,00%
SGDSingapore Dollar SOR (Swap Overnight) Rate1,00%1,00%
TRYTRLIBOR (Turkish Lira Overnight Interbank offered rate)100,00%100,00%
ZARSouth Africa Benchmark Overnight Rate on Deposits (Sabor)3,00%3,00%

1 Caps or the deviation for the effective rate allowed above or below the benchmark fixing can change at any time without explicit prior notice.

Interactive Brokers (IBKR) follows the steps listed in the Calculations section below to calculate the daily interest payable or receivable on cash balances. Interactive Brokers will combine, where possible, the balances held across multiple account segments of the integrated account. However, balances across multiple Interactive Brokers accounts will not be consolidated. In the event you hold an account with Interactive Brokers Ireland Limited (IBIE), the calculation will be Ending Settled Cash – Short Stock Collateral Value.

Calculations

Step 1

At the end of every day, IBKR will obtain the following balances in each currency:

  • Ending Settled Cash balance in the securities account segment
  • Ending Settled Cash balance in the commodities account segment
  • Collateral balance for settled short stock positions
  • Ending Settled Cash balance in the IBUKL segment
  • Commodity risk margin requirement
  • AdjustmentForSecuritiesDeficit

The cash balances are reported on the Daily Statement under Ending Settled Cash. The commodity risk margin requirement is the Maintenance Margin Requirement as reported on the daily Margin Report minus the total commodity option value. The AdjustmentForSecuritiesDeficit is calculated as follows:

Minimum(-Minimum(EndingSettledCash_Securities + EndingSettledCash_IBUKL,0), EndingSettledCash_Commodities – CommodityRiskMargin)

The purpose of the AdjustmentForSecuritiesDeficit is to determine the value of the excess commodities funds which will be used to offset negative balances in the securities and IBUKL segments.

The collateral balance per short stock is calculated by multiplying the prior day’s closing price by an adjustment factor based on the currency, rounding this value up, then multiplying by the number of shares.

For example, the collateral balance on a USD-denominated security would be:

Collateral Balance = (stock A prior day closing price x 102%, rounded up to the nearest 1.00) x (number of shares stock A) + (stock B prior day closing price x 102%, rounded up) x (number of shares stock B)

The adjustments utilized by IBKR are as follows:

USD-denominated stock – multiply by 102%, round up to nearest 1.00
CAD-denominated stock – multiply by 102%, round up to nearest 1.00
EUR-denominated stock – multiply by 105%, round up to nearest 0.01
CHF-denominated stock – multiply by 105%, round up to nearest 0.01
GBP-denominated stock – multiply by 105%, round up to nearest 0.01
SEK-denominated stock – multiply by 105%, round up to nearest 0.01
AUD-denominated stock – multiply by 105%, round up to nearest 0.01

Step 2

IBKR will obtain the USD-equivalent Net Asset Value in the account, consolidating the equity across the IBLLC and IBUKL accounts where possible. The Net Asset Value (NAV) is reflected in the daily account statement under the same name.

For the purposes of crediting interest on either long settled cash balances or short stock collateral values, accounts with a Net Asset Value (NAV) of USD 100,000 (or equivalent) or more are paid interest at the full rate for which they are eligible. Accounts with NAV of less than USD 100,000 (or equivalent) receive interest at rates proportional to the size of the account. For example, an account with a NAV of USD 50,000 earns credit interest at a rate equal to one-half the rate paid by IBKR to accounts with a NAV of USD 100,000 or more.

For example, if an account holds

  • Settled Long Cash 370,000 EUR
  • Settled Short Cash (370,000) USD

Calculate the USD-equivalent of the EUR balance = 370,000 x 1.2 = 444,000

Calculate the USD NAV = 444,000 – 370,000 = 74,000

As the account would have NAV less than USD 100,000, a proportionate amount of interest would be paid on the long EUR cash balance. Interest would be debited on the short USD cash balance.

Step 3

IBKR calculates an Adjusted Cash Balance for the Securities and IBUKL segments as well an Adjusted Cash Balance for the Commodity segment. This is done using the following formula:

AdjustedCashSecurities+IBUKL= EndingSettledCash_Securities + AdjustmentForSecuritiesDeficit + EndingSettledCash_IBUKL – ShortStockCollateralValue

AdjustedCashCommodities = EndingSettledCash_Commodities – CommodityRiskMargin – AdjustmentForSecuritiesDeficit

Step 4

IBKR will then determine how much of the AdjustedCashSecurities+IBUKL balance should be applied to each rate tier (see tier tables). Finally, we calculate the interest using the applicable rates (also from the tier tables): 3

No interest will be paid on excess funds in the commodities segment (AdjustmentCashCommodities). In the event negative interest rates apply, interest will be charged on long balances in the commodities segment.

The numberOfDaysInYear are based on industry standards for money market activity.

  • 365: AUD, CAD, CNH/CNY, GBP, HKD, KRW, ILS, INR, NZD, RUB, SGD
  • 360: USD, EUR, CHF, CZK, JPY, SEK, NOK, DKK, HUF, MXN
  • 365: USD cash balances held in Bank Deposit Sweep Program.
Interest = ( Balance tier1 * Rate tier1 / numberOfDaysInYear )
( Balance tier2 * Rate tier2 / numberOfDaysInYear )
( Balance tier3 * Rate tier3 / numberOfDaysInYear )
8/2/2019 BM 2.14
Balance BM – 0.5% Rate Basis 1 Day interest
Cash at IBKR 246,500.00 1.64 360 11.23
Sweep Balance 246,500.00 1.64 365 11.08
Accruals

Accruals will be posted to the applicable account segment as follows:

If the adjusted cash balances of the security, commodity and IBUKL segments are the same sign (i.e. all positive or all negative), the interest will be paid to the securities and IBUKL segments on pro-rata basis while no interest will accrue on the commodity balance. If the cash balances of the security and IBUKL segments are of opposite sign the interest of the Integrated Investment account will accrue to the segment with the higher balance.

The results of the above calculations are booked to a special “Accrued Cash” sub-account, one for each currency. Accrued Cash has the following features and functions:

  • FUNDS FOR TRADING: accrued cash is applied to trading balances, both positively and negatively.
  • WITHDRAWALS: accrued cash does not affect Settled Cash balances and therefore cannot be withdrawn. Positive accrued cash balances do not increase the available funds for withdrawal. However, negative accrued cash will reduce the funds available for withdrawal. This avoids the problem of having closed accounts with negative balances.
  • PATTERN DAY TRADING: accrued cash does not count toward Pattern Day Trading minimum balance requirements.

Each day, the new calculations for accrued interest are added to the cumulative accrued cash balances from the previous day.

Statements: Whenever the balance of accrued cash exceeds USD 1.00 (or equivalent), we will show the accrual on the Daily Statement. Accruals smaller than USD 1.00 are recorded in the IBKR systems but are not reported on the statements.

Final Postings

At the end of the month, or within the first few days of the following month, IBKR follows these steps:

  1. IBKR recalculates all the interest amounts using the calculations above. The new calculation is usually identical to the original cash accruals but may vary by small amounts due to corrections in settled balances or rates.
  2. IBKR determines the cumulative accrued cash for the previous month as the sum of the individual days.
  3. IBKR reverses this amount in the Accrued Cash sub-account at the beginning of the following month. For example, if the accrued cash balance for July was positive, we apply a debit charge to accrued cash in early August.
  4. Simultaneously, we book the final interest calculation from Step 1 above to the regular cash account. In effect, Steps 3 and 4 above convert “pending cash” to “actual cash.”
  5. These transactions 2 are reported on the Monthly Statement.

Trade Date versus Settlement Date (or Value Date)

In most large financial transactions, there is a time delay between the date on which the transaction is agreed to, and the date on which it settles, i.e., when the actual payment occurs. In the case of stocks (for example US stocks) there is a two-business day settlement period. If the trade is executed on a Monday, under normal settlement conditions the actual transfer of money occurs on Wednesday. If the trade occurs on Thursday, two-business days later crosses the weekend so normal settlement is the following Monday. Exchange and banking holidays the fall within the settlement period will push back the settlement date.

Why is the Settlement Date Important?

Only settled money is considered for interest rate purposes. When one buys stock, one retains the rights to interest on the money until settlement date. Similarly, sellers only start to receive interest beginning on settlement date.

Settlement Dating is generally a minor consideration for stock, option, and future traders. However, due to the large amounts of capital involved, understanding the concept of Settlement Dating is critical to FOREX and fixed income (bond or money market) traders.

Disclosures

  1. The new accrued cash shown after the above postings may not be zero. The residual balances reflect the continuing accruals for the first days of the current month. For example, if IBKR processes the final interest calculation on August 6, Accrued Cash will still show the activity from August 1 through August 6.
  2. Interest will not accrue or be paid to the commodity segment of the account. Both credit and debit interest will accrue and pay to/from the securities and IBUKL segments.
  3. The calculated interest per tier will be rounded to the nearest 0.01 (or 1 for JPY). Therefore, a calculated interest of USD 0.0051 will be rounded to 0.01.