IBKR Margin Rates

When calculating rates, keep in mind that IBKR uses a blended rate based on the tiers below. For example, for a balance over USD 1,000,000, the first 100,000 is charged at the Tier I rate, the next 900,000 at the Tier II rate, etc. When determining the quoted spread, IBKR will use the set benchmark rate or a benchmark rate of 0 for all benchmark rates less than 0.

IBKR accrues interest on a daily basis and posts actual interest monthly on the third business day of the following month.

The tiers on which interest is based may change from time to time without prior notification to clients. Such adjustments are done periodically to adjust for changes in currency rates.

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.

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).

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.