# Margin Education Center

## Introduction to Margin

Imagine you have \$50,000 in cash and receive a loan of \$50,000 to buy a house for \$100,000 and then in a year you sell the home for \$500,000. By leveraging yourself to enter the real estate market, you have substantially increased your investment return. While you have just enjoyed greater gains, you also risked greater losses had the investment not worked in your favor.

## What is Margin?

### Margin Models and Trading Accounts

Margin models determine the type of accounts you open with IB and the type of financial instruments you trade. Trading on margin uses two key methodologies: rules-based and risk-based margin.

In Rules based margin systems, your margin obligations are calculated by a defined formula and applied to each marginable financial instrument. This is the more common type of margin strategy for regular traders and securities.

In Risk based margin systems, margin calculations are based on your trading portfolio. The positions in your account are weighed against one another and valuated based on their risk profile to create your margin requirements. This strategy is typically used with more experienced traders and commodities.

### Margin Calculation Basis Table

Margin requirements are calculated either on a rules basis and/or a risk basis.

Margin Calculation Basis Available Products
Rule-Based Margin System: Predefined and static calculations are applied to each position or predefined groups of positions ("strategies"). Margin accounts: US stocks, index options, stock options, single stock futures, and mutual funds.
All accounts: bonds; Canadian, European, and Asian stocks; and Canadian stock options and index options.
Risk-Based Margin System: Exchanges consider the maximum one day risk on all the positions in a complete portfolio, or subportfolio together (for example, a future and all the options delivering that future). Portfolio Margin accounts: US stocks, index options, stock options, single stock futures, and mutual funds.
All accounts: All futures and future options in any account. Non-US/Non-Canadian stock options and index options in any account.

Margin requirements for each underlying are listed on the appropriate exchange site for the contract. A summary of the requirements for the major futures contracts as well as links to the exchange sites are available on the Futures & FOPs page.

### Securities vs. Commodities Margin

Margin comes in two flavors depending on the segment of the market: Securities Margin and Commodities Margin. Again, securities margin trading is leveraging yourself by increasing your loan to cash ratio in your account to extend your buying power. For example, if you have \$5000 and borrow another \$5000 you are leveraged 2:1 and your buying power is increased to \$10,000.

Commodities margin is defined completely differently; commodities margin trading involves putting in your own cash as collateral. Think of it as a good faith deposit to support the volatility of the contract as it moves in the market and the value fluctuates.

Defining Trait Calculation
Securities Margin Borrowing money to buy securities.

Margin Loan + Margin Deposit = Market Value of Securities

Margin Deposit >= Margin Requirement

Commodities Margin Depositing money into your trading account to enter into a commodities contract.

Collateral = Amount of Equity Required to Support Futures Contract

Collateral >= Margin Requirement

Margin requirements for each underlying are listed on the appropriate exchange site for the contract. A summary of the requirements for the major futures contracts as well as links to the exchange sites are available on the Futures & FOPs page.

### Initial and Maintenance Margin

Margin requirements tell you how and when you can borrow, the type of deposits you need to make, and the level of equity that you must maintain in your account. Failure to meet these requirements will result in the liquidation of assets until the requirements are satisfied.

##### Securities Initial Margin

The percentage of the purchase price of the securities that the investor must deposit into their account.

You must have a minimum of \$2000 or 100% of the purchase price (whichever is less) deposited with IB.

##### Securities Maintenance Margin

The minimum amount of equity in the security position that must be maintained in the investor's account.

## Margin Calculations for Securities

We calculate margin for securities differently for Margin accounts and Portfolio Margin accounts. Reg T Margin securities calculations are described below. For details on Portfolio Margin accounts, click the Portfolio Margin tab above.

##### We apply margin calculations to securities in Margin accounts as follows:
1. At the time of a trade.
2. In real-time throughout the trading day.
3. At the end of the trading day.
4. Overnight.

One important thing to remember about our margin calculations is that we apply the Regulation T initial margin requirement at the end of the trading day (3:50 PM) as part of our Special Memorandum Account (SMA) calculation. At the time of trade and in real time throughout the trading day, we apply our own margin calculations, which are described below.

##### You can also use the following liquidation calculations:
1. How to Determine the Last Stock Price Before We Begin to Liquidate the Position?
2. How Much Stock Do We Liquidate?

You can monitor most of the values used in the calculations described on this page in real time in the Account Window in Trader Workstation.

## 1. Time of Trade Margin Calculations

#### When you open a new position, we apply the following:

You are required to have a minimum of \$2,000 or USD equivalent of securities equity with loan value or commodities net liquidation value to open a new position. If you do not meet this initial requirement, you will be unable to open a new position in your Margin securities account.

Upon submission of an order, a check is made against real-time available funds. If available funds, after the order request, would be greater than or equal to zero, the order is accepted; if available funds would be negative, the order is rejected.

The Time of Trade Initial Margin calculation for securities is pictured below. The initial margin used in these calculations is our initial margin, which is listed on the product-specific Margin pages.

##### Example: Securities Time of Trade Initial Margin Calculation

Available Funds > 0
(Available Funds = Securities Equity with Loan Value(ELV1) - Initial Margin Requirement)

Order Request Submitted
If the account has a minimum of
\$2000 or USD equivalent of securities Equity with Loan Value(ELV1)
Continue...
Otherwise
Order Rejected
Check Available Funds:
Available Funds = [Equity with Loan Value(ELV1) - Initial Margin]
If Available Funds >= 0
Order Submitted
Otherwise
Order Rejected
1Equity with Loan Value (ELV) = [Total cash value + stock value + bond value + fund value + European & Asian options value]

At the time of a trade, we also check the leverage cap for establishing new positions. The leverage limitation is a house margin requirement that limits the risk associated with the close-out of large positions held on margin. We perform the following calculation to ensure that the Gross Position Value is not more than 30 times the Net Liquidation Value minus the futures options value:

##### Example: Time of Trade Position Leverage Check
Securities Gross Position Value <= 30 * (Net Liquidation Value - Futures Options Value)

If the result of this calculation is true, then you have not exceeded the leverage cap for establishing new positions. If the trade would put your account over the leverage cap (that is, the calculation is not true), then the order will not be accepted.

Order Request Submitted
Check the New Position Leverage Cap
If the Securities Gross Position Value1 <=
30 * (Net Liquidation Value2 - Futures Options Value3)
Order Submitted
Otherwise
Order Rejected
1Securities Gross Position Value = [Long Stock Value + Short Stock Value + Long Option Value + Short Option Vallue + Fund Value]
2Net Liquidation Value = [SECURITIES:(Total Cash value + stock value + securities options value + bond value + fund value) + COMMODITIES:(Total cash value (which includes futures P&L) + commodities options value)]
3Futures Options Value = (As set by the exchange)

## 2. Real-Time Margin Calculations

#### Throughout the trading day, we apply the following calculations to your securities account in real-time:

Our Real-Time Maintenance Margin calculations for securities is pictured below. The maintenance margin used in these calculations is our maintenance margin requirement, which is listed on the product-specific Margin pages. In the calculations below, "Excess Liquidity" refers to excess maintenance margin equity.

##### Example: Securities Real-Time Maintenance Margin Calculation

Excess Liquidity >= 0
(Excess Liquidity= Securities Equity with Loan Value - Maintenance Margin Requirement
)

Check Excess Liquidity
If Excess Liquidity1 >= 0
Maintenance Margin requirement satisfied
Otherwise
Positions Liquidated in real-time
1Excess Liquidity = [Total cash value + stock value + bond value + fund value + European & Asian options value ]- (Maintenance Margin Requirement)

There is a real-time check on overall position leverage to ensure that the Gross Position Value is not more than 50 times the Net Liquidation Value minus the futures options value. The leverage limitation is a house margin requirement that limits the risk associated with the close-out of large positions held on margin. The calculation is shown below.

##### Example: Real-Time Gross Position Leverage Check

Securities Gross Position Value <= 50 * (Net Liquidation Value - Futures Options Value)

If the result of this calculation is not true, positions may be liquidated to reduce the Gross Position Leverage.

Check the New Position Leverage Cap
If the Securities Gross Position Value1 <=
50 * (Net Liquidation Value2 - Futures Options Value3)
Account Gross Position Leverage is Acceptable
Otherwise
Account Liquidation to reduce leverage
1Securities Gross Position Value = [Long Stock Value + Short Stock Value + Long Option Value + Short Option Vallue + Fund Value]
2Net Liquidation Value = [SECURITIES:(Total Cash value + stock value + securities options value + bond value + fund value) + COMMODITIES:(Total cash value (which includes futures P&L) + commodities options value)]
3Futures Options Value = (As set by the exchange)

An additional leverage check on cash is made to ensure that the total FX settlement value is no more than 250 times the Net Liquidation Value as shown below.

##### Real-Time Cash Leverage Check

Total Settlement Value of All Unsettled FX Trades <= 250 * (Net Liquidation Value)

If the result of this calculation is not true, account liquidation may occur.

Check Cash Leverage Cap
If the Total Settlement Value of All Unsettled FX Trades <=
250 * (Net Liquidation Value1)
Account Cash Leverage is Acceptable
Otherwise
Account Liquidation to reduce leverage
1Net Liquidation Value = [SECURITIES:(Total Cash value + stock value + securities options value + bond value + fund value) + COMMODITIES:(Total cash value (which includes futures P&L) + commodities options value)]

We reduce the marginability of stocks for accounts holding concentrated positions relative to the shares outstanding (SHO) of a company. For Margin securities accounts, this algorithm increases the margin requirement for stock positions exceeding 1% of the published SHO from its default to 100% (in other words, decreases the amount of money that can be borrowed against a stock position toward zero). At 5% concentration, positions have a 100% margin requirement.

Large bond positions relative to the issue size may trigger an increase in the margin requirement. The review of bond marginability is done periodically to consider redemptions and calls, as well as other factors, which may affect the remaining liquidity of the particular bond instrument. Less liquid bonds are given less favorable margin treatment.

We will automatically liquidate when an account falls below the minimum margin requirement. However, to allow a customer the ability to manage risk prior to a liquidation, we calculate Soft Edge Margin (SEM) during the trading day. From the start of the trading day until 15 minutes before the close of the trading day, Soft Edge Margin allows for an account's margin deficit to be within a specified percentage of the account's Net Liquidation Value, currently 10%. When SEM ends, the full maintenance requirement must be met. When SEM is not applicable, the account must meet 100% of maintenance margin.

Soft Edge Margin start time of a contract is the latest of:

• the market open, the latest open time if listed on multiple exchanges;
• or the start of liquidation hours, which are based on trading currency, asset category, exchange and product.

Soft Edge Margin end time of a contract is the earliest of:

• 15 minutes before market close, the earliest close time if listed on multiple exchanges;
• or 15 minutes before the end of liquidation hours;
• or the start of Reg T enforcement time.

If an account falls below the minimum maintenance margin, it will not be automatically liquidated until it falls below the Soft Edge Margin. This allows a customer's account to be in margin violation for a short period of time. Soft Edge Margin is not displayed in Trader Workstation. Once the account falls below SEM however, it is then required to meet full maintenance margin.

Please note that we reserve the right to restrict soft edge access on any given day, and may eliminate SEM completely in times of heightened volatility.

## 3. SMA and End of Day Calculations

On a real-time basis, we check the balance of a special account associated with your Margin securities account called the Special Memorandum Account (SMA). We calculate a running balance of your SMA throughout the trading day, then enforce Regulation T initial margin requirements at the end of the trading day. No cash withdrawal will be allowed that causes SMA to go negative on a real-time basis.

As described above, we calculate SMA in real time throughout the trading day, but we enforce Regulation T initial margin requirements (typically 50% for stocks or 100% for nonmarginable securities) at the end of the trading day. Whenever you have a position change on a trading day, we check the balance of your SMA at the end of the US trading day (15:50-17:20 ET), to ensure that it is greater than or equal to zero.

We use the following calculation to check your SMA balance in real time and apply Regulation T initial margin requirements to securities that can be purchased on margin. Note that this is the same SMA calculation that is used throughout the trading day. In the first calculation, "today's trades initial margin requirements" are added for SELL orders and subtracted for BUY orders, and are based on US Regulation T Initial Margin requirements.

Special Memorandum Account(SMA) is the great of:
SMA =
[Prior Day SMA +/- Change in Day's Cash +/- Today's Trades Initial Margin Requirements]
or
[Equity with Loan Value - Reg T Margin]
If the SMA balance at the end of the trading day is negative,
your account is subject to liquidation.

SMA is calculated based on the following rules:

• Cash deposits are credited to SMA.
• Cash withdrawals are debited from SMA.
• Dividends are credited to SMA.
• Trades are netted on a per contract per day basis.
• Realized pnl, i.e. day trading pnl are posted to SMA.
• Commission and tax are debited from SMA.
• All trades (one per contract) are posted to the portfolio at the end of the trading day, if RegTMargin of the portfolio increases, the increased amount is debited from SMA, if RegTMargin of the portfolio decreases, the decreased amount is credited to SMA. The current price of the underlying, if needed, is used in this calculation.
• Option sales proceeds are credited to SMA.
• Premiums for options purchased are debited from SMA.

The change to SMA resulting from trades is effectively the change in RegTEquity minus the change in RegTMargin.
• Universal transfers are treated the same way cash deposits and withdrawals are treated.
• Market appreciation: If RegTExcess of a margin account is greater than SMA at the close (normally 16:00 US/Eastern), SMA is set to equal to RegTExcess. Note that SMA balance will never decrease because of market movements. RegTExcess = 0 or (RegTEquity - RegTMargin), whichever is greater.
• Currency trades do not affect SMA.
• Fees, such as order cancellation fee, market data fee, etc. do not affect SMA.
• Exercises and assignments (EA) are reported to the credit manager when we receive reports from clearing houses. They will be treated as trades on that day. For example, on expiration, we receive EA notices on the weekend; these trades have Friday as trade date in the clearing system, but they will be treated as Monday's trade for SMA purposes by the credit manager. Exercise requests do not change SMA. DVP transactions are treated as trades.

## 5. How to Determine the Last Stock Price Before We Begin to Liquidate the Position?

Use the following series of calculations to determine the last stock price of a position before we begin to liquidate that position. Note that this calculation applies only to single stock positions.

(Cash Borrowed / # of Shares)/(1-margin rate)= Last Price Before Liquidation

## 6. How Much Stock Do We Liquidate?

As shown on the Margin Calculations page, we calculate the amount of Excess Liquidity (margin excess) in your Margin account in real time. If your Excess Liquidity balance is less than zero, we will liquidate positions in your account to bring the Excess Liquidity balance up to at least zero.

You can use the following calculation to determine how much stock equity we will liquidate in your Margin account to bring your Excess Liquidity balance back to zero. Note that this calculation applies only to stocks.

Liquidation Amount = (Excess Liquidity Deficit * 4)

## Securities Margin Examples

The following table shows an example of a typical sequence of trading events
involving securities and how they affect a Margin Account.[5]

Cash \$10,000.00 Initial deposit
Securities Market Value \$0.00 No positions held
Equity with Loan Value (ELV1) \$10,000.00
Initial Margin \$0.00 IM = 25% * Stock Value
Maintenance Margin (MM) \$0.00 MM = 25% * Stock Value
Available Funds \$10,000.00 ELV - IM
Excess Liquidity \$10,000.00 ELV - MM

Reg T Margin \$0.00 Reg T Margin = 50% * Stock Value
SMA2 \$10,000.00 SMA >= 0
SMA Requirement Satisfied, NO liquidation
Cash (\$10,000.00)
Securities Market Value \$20,000.00
Equity with Loan Value (ELV1) \$10,000.00
Initial Margin \$5,000.00 IM = 25% * Stock Value
Maintenance Margin (MM) \$5,000.00 MM = 25% * Stock Value
Available Funds \$5,000.00 ELV-IM
Available Funds were >=0 at the time of the trade, so the trade was submitted.
Excess Liquidity \$5,000.00 ELV - MM

Reg T Margin \$10,000.00 Reg T Margin = 50% * Stock Value
SMA2 \$0.00 SMA = The great value of:
(\$10,000.00 – \$0.00 – \$10,000.00) or
(\$10,000.00 – \$10,000.00)
SMA >= 0
SMA Requirement Satisfied, NO liquidation
Cash (\$10,000.00)
Securities Market Value \$22,500.00
Equity with Loan Value (ELV1) \$12,500.00
Initial Margin \$5,625.00 IM = 25% * Stock Value
Maintenance Margin (MM) \$5,625.00 MM = 25% * Stock Value
Available Funds \$6,875.00 ELVIM
Excess Liquidity \$6,875.00 ELV - MM
Excess Liquidity >=0, so NO LIQUIDATION occurs.
Cash (\$10,000.00)
Securities Market Value \$17,500.00
Equity with Loan Value (ELV1) \$7,500.00
Initial Margin \$4,375.00 IM = 25% * Stock Value
Maintenance Margin (MM) \$4,375.00 MM = 25% * Stock Value
Available Funds \$3,125.00 ELVIM
Excess Liquidity \$3,125.00 ELV - MM

Reg T Margin \$8,750.00 Reg T Margin = 50% * Stock Value
SMA2 \$0.00 SMA = The great value of:
(\$0.00 +/– \$0.00 + \$0.00)
or
(\$7,500.00 – \$8,750.00)
SMA >= 0
SMA Requirement Satisfied, NO liquidation
Cash \$12,500.00
Securities Market Value \$0.00 Positions no longer held.
Equity with Loan Value (ELV1) \$12,500.00
Initial Margin \$0.00 IM = 25% * Stock Value
Maintenance Margin (MM) \$0.00 MM = 25% * Stock Value
Available Funds \$12,500.00 ELV-IM
Excess Liquidity \$12,500.00 ELV - MM

Reg T Margin \$0.00 Reg T Margin = 50% * Stock Value
SMA2 \$12,500.00 SMA = The great value of:
(\$0.00 +/– \$0.00 + \$11,250.00) or
(\$12,500.00 – \$0.00)
SMA >= 0
SMA Requirement Satisfied, NO liquidation
Cash \$12,500.00
Securities Market Value \$0.00
Equity with Loan Value (ELV1) \$12,500.00
Initial Margin \$12,625.00 IM = 25% * Stock Value
Maintenance Margin (MM) \$12,625.00 MM = 25% * Stock Value
Available Funds (\$125.00) ELV-IM
Available Funds <=0

Excess Liquidity (\$125.00) ELV - MM
Cash (\$17,500.00)
Securities Market Value \$30,000.00
Equity with Loan Value (ELV1) \$12,500.00
Initial Margin \$7,500.00 IM = 25% * Stock Value
Maintenance Margin (MM) \$7,500.00 MM = 25% * Stock Value
Available Funds \$5,000.00 ELVIM
Excess Liquidity \$5,000.00 ELV - MM

Reg T Margin \$15,000.00 Reg T Margin = 50% * Stock Value
SMA2 -\$2,500.00 SMA = The great value of:
(\$12,500 +/– \$0.00 – \$15,000.00) or
(\$12,500.00 – \$15,000.00)
SMA = (\$2,500.00) which is < 0
Shares are Liquidated.
Cash (\$17,500.00)
Securities Market Value \$22,500.00
Equity with Loan Value (ELV1) \$5,000.00
Initial Margin \$5,625.00 IM = 25% * Stock Value
Maintenance Margin (MM) \$5,625.00 MM = 25% * Stock Value
Available Funds (\$625.00) ELVIM
Excess Liquidity (\$625.00) ELV - MM
Excess Liquidity < 0

so shares will be Liquidated.

## Commodities Margin Calculation

Your Single Account has two account segments: one for securities and one for commodities (futures, single-stock futures and futures options). Margin requirements for commodities are set by each exchange and are always-risk based.

##### We apply margin calculations to commodities as follows:
1. At the time of a trade.
2. In real-time throughout the trading day.
3. Real-time liquidation.
4. 50% margin benefit.

You can monitor most of the values used in the calculations described on this page in real time in the Account Window in Trader Workstation (TWS).

## 1. Time of Trade Margin Calculations

When you open a new position, we apply the following:

• Initial Minimum Equity Requirement
• Time of Trade Initial Margin Calculation

You are required to have a minimum of \$2,000 or USD equivalent of commodities Net Liquidation Value to open a new position.

In a commodities account, you can satisfy this requirement with assets in currencies other than your base currency. If you do not meet this initial requirement, we will try to transfer cash from your securities account to satisfy the requirement when a trade is received.

If you do not have the minimum of \$2,000 or USD equivalent of commodities Net Liquidation Value, or if you cannot satisfy the initital minimum equity requirement with assets in another currency, or if there is not enough cash in your securities account to satisfy the requirement, you will be unable to open the new position in your commodities account.

Upon submission of an order, a check is made against real-time available funds. If available funds, after the order request, would be greater than or equal to zero, the order is accepted; if available funds would be negative, the order is rejected.

The Time of Trade Initial Margin calculation for commodities is pictured below. The initial margin used in this calculation is set by the individual exchanges and listed on the Futures & FOPs Margin page.

##### Example: Commodities Time of Trade Initial Margin Calculation

Available Funds > 0
(Available Funds = Commodities Net Liquidation Value2 - Initial Margin Requirement3)

Order Request Submitted
If the account has a minimum of
\$2000 or USD equivalent of securities Equity with Loan Value(ELV1)
Continue...
Otherwise
Order Rejected
Check Available Funds:
Available Funds = [Commodities Net Liquidation Value(NLV2) - Initial Margin Requirement3]
If Available Funds >= 0
Order Submitted
Otherwise
Order Rejected
1Equity with Loan Value (ELV) = [Total cash value + stock value + bond value + fund value + European & Asian options value]
2Commodities Net Liquidation Value (NLV) = [Total cash value whcih includes: (futures P&L) + commodities options value]
3Initial Margin Requirement As set by the exchange

## 2. Real-Time Margin Calculations

Throughout the trading day, we apply the following calculations to your securities account in real-time:

• Real-Time Maintenance Margin Calculation
• Soft-Edge Margining

Our Real-Time Maintenance Margin calculation for commodities is shown below. The maintenance margin used in this calculation is set by the individual exchanges and listed on the Futures & FOPs Margin page. In the calculations below, "Excess Liquidity" refers to excess maintenance margin equity.

##### Example: Commodities Real-Time Maintenance Margin Calculation

Excess Liquidity >= 0
(Excess Liquidity1 = Commodities Net Liquidation Value2 - Maintenance Margin Requirement3)

Check Excess Liquidity
If Excess Liquidity1 >= 0
Maintenance Margin requirement satisfied
Otherwise
Positions Liquidated in real-time
1Excess Liquidity = [Commodities Net Liquidation Value - Maintenance Margin Requirement]
2Commodities Net Liquidation Value = [Total cash value whcih includes: (futures P&L) + commodities options value]
3Maintenance Margin Requirement As set by the exchange

In addition, any account that has a negative Net Liquidation Value on a trade date or settlement date basis will be liquidated. It should be noted whereas futures settle each night, futures options are generally treated on a premium style basis, which means that they will not settle until the options are sold or expire. Therefore, for certain combination futures and futures options positions, there may be a mismatch in cash flows which could cause cash to go negative even though Net Liquidation Value is positive. In addition, there are a handful of options where local custom is to cash settle the option each night at the clearing house (e.g. HKFE HSI Options), but we may choose to margin these options on a premium style basis.

We will automatically liquidate when an account falls below the minimum margin requirement. However, to allow a customer the ability to manage risk prior to a liquidation, we calculate Soft Edge Margin (SEM) during the trading day. From the start of the trading day until 15 minutes before the close of the trading day, Soft Edge Margin allows for an account's margin deficit to be within a specified percentage of the account's Net Liquidation Value, currently 10%. When SEM ends, the full maintenance requirement must be met. When SEM is not applicable, the account must meet 100% of maintenance margin.

Soft Edge Margin start time of a contract is the latest of:

• the market open, or the latest open time if listed on multiple exchanges;
• or the start of liquidation hours, which are based on trading currency, asset category, exchange and product.

Soft Edge Margin end time of a contract is the earliest of:

• 15 minutes before market close, or the earliest close time if listed on multiple exchanges;
• or 15 minutes before the end of liquidation hours.

If an account falls below the minimum maintenance margin, it will not be automatically liquidated until it falls below the Soft Edge Margin. This allows a customer's account to be in margin violation for a short period of time. Soft Edge Margin is not displayed in Trader Workstation. Once the account falls below SEM however, it is then required to meet full maintenance margin.

Please note that we reserve the right to restrict soft edge access on any given day, and may eliminate SEM completely in times of heightened volatility.

## 3. Real-Time Liquidation

Real-time liquidation occurs when your commodity account does not meet the maintenance margin requirement. Before we liquidate, however, we do the following:

• We transfer excess cash from your equity account to your commodity account so that the maintenance margin requirement is met.
• To help you stay on top of your margin requirements, we provide pop-up messages and color-coded account information to notify you that you are approaching a serious margin deficiency. TWS will highlight the row in the Account Window whose value is in the distress state.

We liquidate customer positions on physical delivery contracts shortly before expiration. Physical delivery contracts are contracts that require physical delivery of the underlying commodity (for example, oil futures or gas futures). Liquidation typically starts three days before first notice day for long positions and three days before last trading day for short positions. Certain contracts have different schedules.

## 4. 50% Margin Benefit

Some futures products are margined at 50% of the normal margin requirements during normal liquid trading hours for each product type. Each day at 15 minutes before the close of the normal trading session for a product, margin requirements will revert back to the 100% requirement until the opening of normal trading hours the next day. Margin requirements will always be applied at 100% for all spread transactions.

For a complete list of products that we margin at 50%, see the Futures - Intraday Margin Requirements on the Futures & FOPs page.

## Commodities Margin Example

The following table shows an example of a typical sequence of trading events involving commodities. Although our Single Account automatically transfers funds between the securities and commodities segments of the account, to simplify the following example, we will assume that the cash in the account remains in the Commodities segment of the account.

 Action Cash Margin Requirement Net Liquidation Value 1. Deposit \$5,000.00 + \$5,000.00 \$5,000.00 2 Buy 1 ES Futures Contract \$5,000.00 \$2,813.00 \$5,000.00 \$850.00 * 50 (multiplier), ES Initial Margin Requirement = \$2,813.00 3. End of Day: ESprice goes to \$860.00 \$5,500.00 \$2813.00 \$5,500.00 Gained \$10.00 * 50 = \$500.00 Net Liquidation Value > \$2,813.00 No Liquidation. 4. Next Day: ES price drops to \$810.00 \$3,000.00 \$4,500.00 \$3,000.00 Lost \$50.00 * 50 = \$2,500.00 Net Liquidation Value < \$4,500.00 Overnight Maintenance Margin Liquidation occurs.

## Margin Requirements

###### Disclosures
1. All liquidations are subject to the normal commission schedule. Advisor clients will not be subject to advisor fees for any liquidating transaction.
2. Calculated at the end of the day under US margin rules.
3. Initial margin requirements calculated under US Regulation T rules. You can find these requirements by using our Contract Search feature to find a specific symbol, then drilling down to the details.
4. Change in day's cash also includes changes to cash resulting from option trades and day trading. Changes in cash resulting from other trades are not included.
5. Except for those futures margined at 50% of the normal margin requirements during normal liquid trading hours, as described in the section 4. 50% Margin Benefit above.
6. See Reg T End of Day Initial Margin calculation.
7. The example uses Initial and Maintenance Margins of 25%. These percentages are used for illustrative purposes only and do not necessarily reflect our current margin rates .

• Note that the credit check for order entry always considers the initial margin of existing positions. Therefore, although an account may be holding an existing position at 35%, for example, it is the initial margin requirement of that position that is used in the credit check calculation for order acceptance.
• Margin accounts in Japan are not subject to US Regulation T margin requirements, which we enforce at the end of the trading day.
• Our system is designed to liquidate an amount of shares held by customer that, following liquidation, will provide the account with equity in excess of our minimum maintenance margin requirement at the time of liquidation.
• In the interest of ensuring the continued safety of its clients, the broker may modify certain margin policies to adjust for unprecedented volatility in financial markets. The changes will promote reduction of leverage in client portfolios and help ensure that clients' accounts are appropriately capitalized.
• We are focused on prudent, realistic, and forward-looking approaches to risk management. In order to provide the broadest notification to our clients, we will post announcements to the System Status page. We strongly encourage all clients to monitor this web page for advance alerts regarding margin policy changes.
• Note that the credit check for order entry always considers the initial margin of existing positions. Therefore, although an account may be holding an existing position at 35%, for example, it is the initial margin requirement of that position that is used in the credit check calculation for order acceptance.
• The market values/prices used to compute the equity or margin requirement in an Interactive account may differ from the price disseminated by exchanges or other market data sources, and may represent Interactive's valuation of the product. Among other things, Interactive may calculate its own index values, Exchange Traded Fund values or derivatives values, and Interactive may value securities or futures or other investment products based on bid price, offer price, last sale price, midpoint or using some other method. Interactive may use a valuation methodology that is more conservative than the marketplace as a whole.
• Due to regulatory restrictions, Interactive Brokers does not currently offer margin lending to natural persons who are residents of Australia.