The first step is to determine whether securities are considered fully-paid for or if they are rehypothecated as collateral for a margin loan balance. A broker who finances client purchases of securities via margin loan is allowed by regulation to loan or pledge as collateral that client’s securities in an amount of 140% of the cash debit balance. For example, if a client maintaining a cash balance of $50,000 buys securities with a market value of $100,000, the debit balance will be $50,000. The broker holds a lien on 140% of that balance or $70,000 of securities. Any securities held by the client in excess of that amount are referred to as excess margin securities ($30,000 in this example) and are required to be segregated unless the client provides authorization to Interactive Brokers LLC to lend through the Stock Yield Enhancement Program. Note that only $30,000 of securities is eligible to be lent via SYEP.
The cash debit balance is determined by first converting all non-USD denominated cash balances to USD and subtracting any short stock sale proceeds (converted to USD as necessary). If the cash balance is negative, then Interactive Brokers LLC will rehypothecate 140% of that balance as collateral for the margin loan. Interactive Brokers LLC does not take into account cash balances maintained in the commodities segment for the purpose of this calculation. For a more detailed explanation, please see here.
The previous day’s settled cash balances are used to determine the amount of the margin lien. Holding certain options positions may increase the amount of the margin lien. The calculation of excess margin securities takes into account settled positions from the previous day and changes in those positions for the current settlement date.
Example 1: Account without a margin lien
Assume that an account holds $100,000 in cash and no other positions. The trader purchases stock valued at $90,000. All securities will be deemed fully paid because the account will have a positive settled cash balance of $10,000.
Example 2: Account with a margin lien
Assume that an account holds $80,000, long stock worth $100,000 and short stock worth $100,000. Long securities totaling $28,000 are deemed margin securities and the remainder of $72,000 are deemed to be excess margin securities.
This is determined by subtracting the long stock value and short sale proceeds from the cash balance ($180,000 – $100,000 - $100,000 = -$20,000) and multiplying the resulting debit by 140% ($20,000 * 1.40 = $28,000).