Is there an upper limit on percentage of futures initial margin required by broker?

lonstud

Active Member
#1
For the past month or so, Interactive broker has arbitrarily raised initial margin requirements on most pharma stocks. Consider the following examples:

Symbol----------------Initial margin Requirment
AJANTPHARM-------------887684
KSCL----------------------869257.5
BIOCON-------------------827490
GLENMARK----------------821450
GRANULES----------------802710
STAR----------------------748060
TORNTPHARM-------------631396
DIVISLAB-----------------554236.8
WOCKPHARMA------------517276.8

I contacted Interactive Brokers and they initially informed me that this is as per exchange requirement. So, I contacted NSE and they informed me that my broker is charging very high margin. When I contacted Interactive broker with this information, they responded that due to their internal margin policy (which cannot be disclosed), such margins have been set. Note that these margin requirements are even higher than the notional value of individual contracts.

By setting such high margin requirements, Interactive broker is effectively creating unjust hurdles for its customers to trade these contracts.

Now, I know that NSE mandates minimum margin requirement. But I cannot find any information regarding cap on margin requirement as a percentage of notional value.

Is anybody aware of such regulation on cap on margin requirement or are brokers free to charge initial margin requirements as much as they calculate as per their internal proprietary calculations?
 

travi

Well-Known Member
#2
Re: Is there an upper limit on percentage of futures initial margin required by broke

For the past month or so, Interactive broker has arbitrarily raised initial margin requirements on most pharma stocks. Consider the following examples:

Symbol----------------Initial margin Requirment
AJANTPHARM-------------887684
KSCL----------------------869257.5
BIOCON-------------------827490
GLENMARK----------------821450
GRANULES----------------802710
STAR----------------------748060
TORNTPHARM-------------631396
DIVISLAB-----------------554236.8
WOCKPHARMA------------517276.8

I contacted Interactive Brokers and they initially informed me that this is as per exchange requirement. So, I contacted NSE and they informed me that my broker is charging very high margin. When I contacted Interactive broker with this information, they responded that due to their internal margin policy (which cannot be disclosed), such margins have been set. Note that these margin requirements are even higher than the notional value of individual contracts.

By setting such high margin requirements, Interactive broker is effectively creating unjust hurdles for its customers to trade these contracts.

Now, I know that NSE mandates minimum margin requirement. But I cannot find any information regarding cap on margin requirement as a percentage of notional value.

Is anybody aware of such regulation on cap on margin requirement or are brokers free to charge initial margin requirements as much as they calculate as per their internal proprietary calculations?
Initial margin cannot/should not be equal to the contact value itself, that is absurd.
It is as if the particular stock has a potential of becoming zero in a single trading session.
To understand margin, it is based on risk that broker may incur, so if practically, a stock moves with in a few percent, that risk is calculated as margin.
AFAIK, I don't think NSE can force IB to reduce margin. IB on their own "for eg. after loosing customers" will realize the problems and get in line.
 

MDK

New Member
#3
Re: Is there an upper limit on percentage of futures initial margin required by broke

For the past month or so, Interactive broker has arbitrarily raised initial margin requirements on most pharma stocks. Consider the following examples:

Symbol----------------Initial margin Requirment
AJANTPHARM-------------887684
KSCL----------------------869257.5
BIOCON-------------------827490
GLENMARK----------------821450
GRANULES----------------802710
STAR----------------------748060
TORNTPHARM-------------631396
DIVISLAB-----------------554236.8
WOCKPHARMA------------517276.8

I contacted Interactive Brokers and they initially informed me that this is as per exchange requirement. So, I contacted NSE and they informed me that my broker is charging very high margin. When I contacted Interactive broker with this information, they responded that due to their internal margin policy (which cannot be disclosed), such margins have been set. Note that these margin requirements are even higher than the notional value of individual contracts.

By setting such high margin requirements, Interactive broker is effectively creating unjust hurdles for its customers to trade these contracts.

Now, I know that NSE mandates minimum margin requirement. But I cannot find any information regarding cap on margin requirement as a percentage of notional value.

Is anybody aware of such regulation on cap on margin requirement or are brokers free to charge initial margin requirements as much as they calculate as per their internal proprietary calculations?
Why would someone trade in futures than - he would very well buy it in cash market at a much lesser cost -

The catch should be that IB wants you to trade in cash market instead of futures

Sent from my ONE A2003 using Tapatalk
 

mithoon

Active Member
#4
Re: Is there an upper limit on percentage of futures initial margin required by broke

For the past month or so, Interactive broker has arbitrarily raised initial margin requirements on most pharma stocks. Consider the following examples:

Symbol----------------Initial margin Requirment
AJANTPHARM-------------887684
KSCL----------------------869257.5
BIOCON-------------------827490
GLENMARK----------------821450
GRANULES----------------802710
STAR----------------------748060
TORNTPHARM-------------631396
DIVISLAB-----------------554236.8
WOCKPHARMA------------517276.8

I contacted Interactive Brokers and they initially informed me that this is as per exchange requirement. So, I contacted NSE and they informed me that my broker is charging very high margin. When I contacted Interactive broker with this information, they responded that due to their internal margin policy (which cannot be disclosed), such margins have been set. Note that these margin requirements are even higher than the notional value of individual contracts.

By setting such high margin requirements, Interactive broker is effectively creating unjust hurdles for its customers to trade these contracts.

Now, I know that NSE mandates minimum margin requirement. But I cannot find any information regarding cap on margin requirement as a percentage of notional value.

Is anybody aware of such regulation on cap on margin requirement or are brokers free to charge initial margin requirements as much as they calculate as per their internal proprietary calculations?
What is the initial margin needed for intraday trading, please advice
 

MDK

New Member
#5
Re: Is there an upper limit on percentage of futures initial margin required by broke

What is the initial margin needed for intraday trading, please advice
For overnight carry over position exchange prescribed margin is a must by all brokers, for intraday each broker can have his own comfort level and set the margin which may be anything between 1/5 to 1/2 the exchange prescribed margin

Sent from my ONE A2003 using Tapatalk
 
#7
Re: Is there an upper limit on percentage of futures initial margin required by broke

For the past month or so, Interactive broker has arbitrarily raised initial margin requirements on most pharma stocks. Consider the following examples:

Symbol----------------Initial margin Requirment
AJANTPHARM-------------887684
KSCL----------------------869257.5
BIOCON-------------------827490
GLENMARK----------------821450
GRANULES----------------802710
STAR----------------------748060
TORNTPHARM-------------631396
DIVISLAB-----------------554236.8
WOCKPHARMA------------517276.8

I contacted Interactive Brokers and they initially informed me that this is as per exchange requirement. So, I contacted NSE and they informed me that my broker is charging very high margin. When I contacted Interactive broker with this information, they responded that due to their internal margin policy (which cannot be disclosed), such margins have been set. Note that these margin requirements are even higher than the notional value of individual contracts.

By setting such high margin requirements, Interactive broker is effectively creating unjust hurdles for its customers to trade these contracts.

Now, I know that NSE mandates minimum margin requirement. But I cannot find any information regarding cap on margin requirement as a percentage of notional value.

Is anybody aware of such regulation on cap on margin requirement or are brokers free to charge initial margin requirements as much as they calculate as per their internal proprietary calculations?
Well, they're doing this with only a few stock-futures - https://www.interactivebrokers.co.in/en/index.php?f=marginnew&p=fut Maybe it's because they have a lot of customers holding a particular leveraged instrument &/or because they're anticipating a big fall/volatility in the instrument, & thereby, they don't want to be exposed to additional risk in those cases. Nonetheless, it seems pretty stupid having to have the full value of a leveraged instrument.

By the way, if you don't mind me asking this, apart from this margin issue, what would you say about their overall service? How long have you been with them? I was thinking about opening an account with them but it seems like there are very few people here trading with them, & therefore, it's difficult to get much information on their services. Thanks.
 

lonstud

Active Member
#8
Re: Is there an upper limit on percentage of futures initial margin required by broke

Apart from this margin issue and in general higher margin requirements of Interactive brokers, I am pretty satisfied with their service.

I have been trading regularly using them since March 2014 and their platform is very stable. Over the past 3 years, I can recall only one instance when their trading systems went down. The outage lasted for about 3 hours till close of day. So, intraday positions were left open for that day. They respond to other account queries in a timely manner. Hope that helps you in making your decision. Let me know if you have any specific queries.

Well, they're doing this with only a few stock-futures - https://www.interactivebrokers.co.in/en/index.php?f=marginnew&p=fut Maybe it's because they have a lot of customers holding a particular leveraged instrument &/or because they're anticipating a big fall/volatility in the instrument, & thereby, they don't want to be exposed to additional risk in those cases. Nonetheless, it seems pretty stupid having to have the full value of a leveraged instrument.

By the way, if you don't mind me asking this, apart from this margin issue, what would you say about their overall service? How long have you been with them? I was thinking about opening an account with them but it seems like there are very few people here trading with them, & therefore, it's difficult to get much information on their services. Thanks.
 
#9
Re: Is there an upper limit on percentage of futures initial margin required by broke

Apart from this margin issue and in general higher margin requirements of Interactive brokers, I am pretty satisfied with their service.

I have been trading regularly using them since March 2014 and their platform is very stable. Over the past 3 years, I can recall only one instance when their trading systems went down. The outage lasted for about 3 hours till close of day. So, intraday positions were left open for that day. They respond to other account queries in a timely manner. Hope that helps you in making your decision. Let me know if you have any specific queries.
Thanks, that sounds great. :) I've read here somewhere that you have to have $30,000 worth of assets to be eligible to trade F&O with them, is that true? And if yes, then do you actually have to provides documentation to say that you have that many assets or is merely declaring on their forms as such is sufficient? Further, what kind of assets would qualify for that requirement, like, does it only have to be Savings A/c balance or shares, or will Fixed Deposits or house-property be considered by them as well (I was wondering about "liquid" assets part). Thanks for being so helpful, like I've said, it's not very easy to get information on IB's Indian customers (I suppose that's in part because they have higher capital requirements, & therefore, fewer Indian traders would be able to meet their requirements).
 

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