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 Universal Account; however balances across multiple Interactive Brokers accounts will not be consolidated. In the event you hold an account with Interactive Brokers Canada or Interactive Brokers Securities Japan, the calculation will be EndingSettledCash – ShortStockCollateralValue only, as there is only one account segment.
At the end of every day, IBKR will obtain the following balances in each currency:
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)
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 |
HKD-denominated stock – multiply by 105%, round up to nearest 0.01 |
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, only accounts with NAV exceeding USD 100,000 will be eligible to receive credit interest on long settled cash balances.
For example, if an account holds
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 not meet the USD 100,000 requirement for credit interest, no interest would be paid on the long EUR cash balance. Interest would be debited on the short USD cash balance.
IBKR calculates an Adjusted Cash Balance for the Securities and IB-UKL segments as well an Adjusted Cash Balance for the Commodity segment. This is done using the following formula:
AdjustedCashSecurities+IB-UKL= EndingSettledCash_Securities + AdjustmentForSecuritiesDeficit + EndingSettledCash_IBUKL – ShortStockCollateralValue
AdjustedCashCommodities = EndingSettledCash_Commodities – CommodityRiskMargin - AdjustmentForSecuritiesDeficit
IBKR will then determine how much of the AdjustedCashSecurities+IB-UKL 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.
Interest = | ( Balance _{tier1} * Rate _{tier1} / numberOfDaysInYear ) |
( Balance _{tier2} * Rate _{tier2} / numberOfDaysInYear ) | |
( Balance _{tier3} * Rate _{tier3} / numberOfDaysInYear ) | |
etc |
Accruals will be posted to the applicable account segment as follows:
If the adjusted cash balances of the security, commodity and IB-UKL segments are the same sign (i.e. all positive or all negative), the interest will be paid to the securities and IB-UKL segments on pro-rata basis while no interest will accrue on the commodity balance. If the cash balances of the security and IB-UKL segments are of opposite sign the interest of the universal 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:
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 $1.00 (or USD equivalent), we will show the accrual on the Daily Statement. Accruals smaller than $1.00 are recorded in the IBKR systems but are not reported on the statements.
At the end of the month, or within the first few days of the following month, IBKR follows these steps:
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.
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.