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Interest & Financing
Interactive Brokers uses internationally recognized benchmarks on overnight deposits as a basis for determining interest rates. We then apply a spread around the benchmark interest rate (“BM”) in tiers, such that larger cash balances receive increasingly better rates, to determine an effective rate.
The spreads and effective rates on credit balances, debit balances and short sale proceed balances are shown in the tables on the tabs above. The current day benchmarks are as follows:
| Currency | Benchmark (BM) |
Rate |
| USD | Fed Funds Effective1 (Overnight Rate)
|
0.140%
|
| AUD | AUD Australian Dollar LIBOR1 (Spot-Next rate)
|
3.987%
|
| CAD | CAD LIBOR1 (Overnight rate)
|
0.248%
|
| CHF | Swiss Franc LIBOR1 (Spot-Next rate)
|
0.048%
|
| EUR | EONIA1 (Euro Overnight Index Average)
|
0.326%
|
| GBP | GBP LIBOR1 (Overnight Rate)
|
0.535%
|
| HKD | HKD HIBOR1 (Overnight rate)
|
0.030%
|
| INR | India SBI Prime (Prime lending rate of the State Bank of India)
|
11.750%
|
| JPY | JPY LIBOR1 (Spot-Next rate)
|
0.116%
|
| KRW | Korean Won KORIBOR1 (1 week)
|
2.050%
|
| MXN | Mexican Interbank TIIE (28 day rate)
|
4.905%
|
| NOK | Norwegian Krone
|
1.760%
|
| NZD | New Zealand Dollar Official Cash Daily Rate
|
2.500%
|
| SEK | SEK STIBOR1 (Overnight Rate)
|
0.250%
|
| SGD | Singapore Dollar (O/N swap) Rate
|
0.063%
|
IB accrues interest on a daily basis and posts actual interest at the end of each month on the monthly statement. For detailed examples on how we calculate interest, click here. For information on how to read interest on your statement, click here.
For additional information regarding the interest benchmarks please refer to the following IB Knowledge Base article http://ibkb.interactivebrokers.com/node/974.
BM = Benchmark Rate
|
Currency
|
Tier I
Balance |
Amount Paid on
Balance > Tier I |
Tier II
Balance |
Amount Paid on
Balance > Tier II |
Tier III Balance |
Amount Paid on Balance > Tier III |
| USD | 10,000 | 0% (BM - 0.5%) |
100,000 | 0% (BM - 0.25%) |
N/A | N/A |
| AUD | 12,000 | 3.487% (BM - 0.5%) |
120,000 | 3.737% (BM - 0.25%) |
N/A | N/A |
| CAD | 12,000 | 0% (BM - 0.5%) |
120,000 | 0% (BM - 0.25%) |
N/A | N/A |
| CHF | 12,000 | 0% (BM - 0.5%) |
120,000 | 0% (BM - 0.25%) |
N/A | N/A |
| EUR | 8,000 | 0% (BM - 0.5%) |
80,000 | 0.076% (BM - 0.25%) |
N/A | N/A |
| GBP | 7,000 | 0.035% (BM - 0.5%) |
70,000 | 0.285% (BM - 0.25%) |
N/A | N/A |
| HKD | 78,000 | 0% (BM - 0.75%) |
780,000 | 0% (BM - 0.5%) |
N/A | N/A |
| JPY | 1,000,000 | 0% (BM - 0.5%) |
10,000,000 | 0% (BM - 0.25%) |
N/A | N/A |
| KRW | 12,000,000 | 1% | 120,000,000 | 1.25% | N/A | N/A |
| MXN | 130,000 | 0.905% (BM - 4%) |
1,300,000 | 1.405% (BM - 3.5%) |
N/A | N/A |
| NOK | 60,000 | 0% (BM - 2.5%) |
600,000 | 0% (BM - 2%) |
N/A | N/A |
| NZD | 18,000 | 0% (BM - 2.5%) |
180,000 | 0.75% (BM - 1.75%) |
1,000,000 | 1.5% (BM - 1%) |
| SEK | 75,000 | 0% (BM - 0.5%) |
750,000 | 0% (BM - 0.25%) |
N/A | N/A |
BM = Benchmark Rate
|
Currency
|
Tier I
Balance |
Amount Paid
on Balance > Tier I |
Tier II
Balance |
Amount Paid
on Balance > Tier II |
Tier III
Balance |
Amount Paid
on Balance > Tier III |
| USD | 100,000 | 0% (BM - 1.25%) |
1,000,000 | 0% (BM - 0.5%) |
3,000,000 | 0% (BM - 0.25%) |
| CAD | 120,000 | 0% (BM - 1.75%) |
1,200,000 | 0% (BM - 1.1%) |
3,600,000 | 0% (BM - 0.9%) |
| CHF | 120,000 | 0% (BM - 2.25%) |
N/A | N/A | N/A | N/A |
| EUR | 80,000 | 0% (BM - 2.25%) |
N/A | N/A | N/A | N/A |
| GBP | 70,000 | 0% (BM - 2.25%) |
N/A | N/A | N/A | N/A |
| SEK |
750,000 | 0% (BM - 2.25%) |
N/A | N/A | N/A | N/A |
| AUD |
120,000 | 1.737% (BM - 2.25%) |
N/A | N/A | N/A | N/A |
| HKD |
780,000 | 0% (BM - 2.25%) |
N/A | N/A | N/A | N/A |
- Minimum interest rate on credit cash balances is 0%. Interest charges will never be applied to credit cash balances.
- Costs for position borrowing of stocks with special considerations (for example hard to borrow instruments) are usually higher than for normal availability stocks. These additional costs will be passed on in the form of lower short stock credit interest. Please note that this may lead to a net debit short stock credit interest in the event that the costs to borrow exceed the interest earned. In order to view the indicative short stock interest rates for a specific stock, IB recommends that customers utilize the Short Stock (SLB) Availability tool located under Account Management/Tools.
BM = Benchmark Rate
| Currency | Tier I Balance |
Amount Charged on Balance
<=Tier I |
Amount Charged on Balance
>Tier I |
Tier II
Balance |
Amount Charged on Balance
> Tier II |
Tier III
Balance |
Amount Charged
on Balance > Tier III |
| USD | 100,000 | 1.64% (BM + 1.5%) |
1.14% (BM + 1%) |
1,000,000 | 0.64% (BM + 0.5%) |
3,000,000 | Greater of 0.5% or (BM + 0.25%)(1) |
| AUD | 120,000 | 5.487% (BM + 1.5%) |
4.987% (BM + 1%) |
1,150,000 | 4.487% (BM + 0.5%) |
120,000,000 | 5.487% (BM + 1.5%) |
| CAD | 120,000 | 1.748% (BM + 1.5%) |
1.248% (BM + 1%) |
1,100,000 | 0.748% (BM + 0.5%) |
120,000,000 | 1.748% (BM + 1.5%) |
| CHF | 120,000 | 1.548% (BM + 1.5%) |
1.048% (BM + 1%) |
1,100,000 | 0.548% (BM + 0.5%) |
120,000,000 | 1.548% (BM + 1.5%) |
| EUR | 80,000 | 1.826% (BM + 1.5%) |
1.326% (BM + 1%) |
700,000 | 0.826% (BM + 0.5%) |
80,000,000 | 1.826% (BM + 1.5%) |
| GBP | 70,000 | 2.035% (BM + 1.5%) |
1.535% (BM + 1%) |
650,000 | 1.035% (BM + 0.5%) |
70,000,000 | 2.035% (BM + 1.5%) |
| HKD | 780,000 | 1.53% (BM + 1.5%) |
1.03% (BM + 1%) |
8,000,000 | 0.53% (BM + 0.5%) |
780,000,000 | 1.53% (BM + 1.5%) |
| JPY | 10,000,000 | 1.616% (BM + 1.5%) |
1.116% (BM + 1%) |
95,000,000 | 0.616% (BM + 0.5%) |
10,000,000,000 | 1.616% (BM + 1.5%) |
| KRW | 120,000,000 | 4.05% (BM + 2%) |
3.55% (BM + 1.5%) |
1,200,000,000 | 3.05% (BM + 1%) |
120,000,000,000 | 4.05% (BM + 2%) |
| MXN | 1,300,000 | 7.905% (BM + 3%) |
6.905% (BM + 2%) |
13,000,000 | 6.405% (BM + 1.5%) |
1,300,000,000 | 7.405% (BM + 2.5%) |
| NOK | 600,000 | 3.26% (BM + 1.5%) |
2.76% (BM + 1%) |
6,000,000 | 2.26% (BM + 0.5%) |
600,000,000 | 3.26% (BM + 1.5%) |
| NZD | 180,000 | 4% (BM + 1.5%) |
3.5% (BM + 1%) |
1,400,000 | 3.25% (BM + 0.75%) |
180,000,000 | 4.25% (BM + 1.75%) |
| SEK | 750,000 | 1.75% (BM + 1.5%) |
1.25% (BM + 1%) |
7,000,000 | 0.75% (BM + 0.5%) |
22,500,000 | 0.5% (BM + 0.25%) |
| SGD | 140,000 | 2.063% (BM + 2%) |
2.063% (BM + 2%) |
N/A | N/A | N/A | N/A |
- [1] Under certain circumstances, balances greater than USD 50 million may be subject to a service charge if not pre-arranged with us. These circumstances would include
a. Trades executed away from us and transferred into your account creating a short cash balance.
b. Withdrawals creating a short cash balance.
For questions about interest rate issues, please use the Inquiry Ticket or Chat (Funds & Banking) system located at the top of Account Management.
Calculations
Step 1: At the end of every day, IB looks at the following balances in each currency:
- Cash balance in commodity sub-account (1)
- Cash balance in security sub-account (1)
- Collateral balance for settled short stock positions
These balances are reported on the Daily Statement with the heading “Ending Settled Cash”.
The collateral balance per short stock is calculated by multiplying the prior day’s closing price by 102%, rounding up to the nearest $1.00. This new price is then multplied by the number of shares.
Collateral Balance = (number of shares stock A) x (stock A prior day closing price x 102%, rounded up) + (number of shares stock B) x (stock B prior day closing price x 102%, rounded up)
Step 2: IB collects the overnight reference interest rate that will serve as the benchmark (“BM”) on which subsequent calculations are made. More information about these benchmarks is available here.
Step 3: IB calculates an Adjusted Cash Balance for the security sub-account by subtracting the short stock collateral value from the security sub-account “Ending Settled Cash”. Essentially, this pulls out the required collateral value derived from sales proceeds on short stock since interest on these funds is calculated using different tiers.
AdjustedCash = EndingSettledCash - ShortStockCollateralValue
Step 4: For each of the 3 adjusted balances (commodity, adjusted security, and short stock), we calculate how much money should be applied to each rate tier (see tier tables). Finally, we calculate the interest using the applicable rates (also from the tier tables):
| Interest = | ( Balance tier1 * Rate tier1 / numberOfDaysInYear ) + |
| ( Balance tier2 * Rate tier2 / numberOfDaysInYear ) + | |
| ( Balance tier3 * Rate tier3 / numberOfDaysInYear ) + | |
| etc |
The numberOfDaysInYear are based on industry standards for money market activity.
- 365: GBP, HKD, KRW
- 360: USD, CAD, EUR, CHF, JPY, AUD, SEK, NOK
Accruals
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:
- FUNDS FOR TRADING: accrued cash is applied
to trading balances, both positively and negatively.
- WITHDRAWALS: accrued cash does not affect Settled
Cash balances and therefore cannot be withdrawn. Positive accrued cash balances
do not increase the available funds for withdrawal. However, negative
accrued cash will reduce the withdrawable funds. This avoids the problem of
accounts being closed and leaving negative balances later on.
- PATTERN DAY TRADING: accrued cash does not count toward Pattern Day Trading minimum balance requirements.
Every 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 (or USD equivalent), we will show the accrual on the Daily Statement. Accruals smaller than $1, are recorded in IB’s systems but are not reported on the statements. This is a temporary issue, and we expect to report all daily accruals on statements with a scheduled system upgrade in the near future.
Final Posting
At the end of the month, or within the first few days of the following month, the following steps are taken:
- IB recalculates all the interest amounts using the method described above.
The new calculation is usually identical to the original cash accruals
but may vary by small amounts due to corrections in settled balances or rates.
- IB determines the cumulative accrued cash for the previous month as the
sum of the individual days.
- We reverse this amount in the Accrued Cash sub-account at the beginning
of the following month. For example, if the accrued cash balance for July
2005 was positive, we apply a debit charge
to accrued cash in early August 2005.
- At the same time, we book the final interest calculation from step 1 to
the regular cash account. In effect, steps 3 and 4 convert “pending
cash” to “actual cash”. In the example above, we would credit
the cash account.
- These transactions(2) are reported on the Monthly Statement. Click here for full explanations about statements.
Definitions
Trade Date Cash versus Settlement Date (also called Value Date):
In most large financial transactions, there is a time delay between when the transaction is agreed to, and when it settles, i.e, when the actual payment occurs. For example, when purchasing a house, “Closing Date” is the date on which the monies and title are actually exchanged which can be several months after the purchase/sale was actually agreed to.
In the case of stocks (for example US stocks) there is a 3 business day settlement period. If the trade is executed on a Monday, under normal settlement conditions, the actual transfer of money occurs on Thursday. If the trade occurs on Wednesday, 3 business days later crosses the weekend so normal settlement is the following Monday. Exchange and banking holidays falling within the settlement period will push back settlements.
Why is Settlement/Value Important?
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 starting from settlement date.
Settlement/Value Dating is generally a minor consideration for stock, option, and future traders. However, due to the large amounts of capital involved, it is critical for FOREX and fixed income (bond or money market) traders to thoroughly understand value dating.
Examples
For all below examples assume benchmark rates as follows:
| Benchmark (BM) | Rate |
| US Dollar LIBOR (Overnight Rate) | 3.528% |
| EONIA (Euro Overnight Index Average) | 2.080% |
| GBP LIBOR (Overnight Rate) | 4.439% |
| Statement Reflects | |||
| USD | |||
| Securities | Commodities | Total | |
| Ending Settled Cash | 7,000 | 0.00 | 7,000 |
Calculate interest on security account balance 7,000
| Tier Balance | Cash | Interest | Calculation |
| < 10,000 | 7,000 | 0.00 | (7,000 x 0/360) |
| 10,000 – 100,000 | 0.00 | 0.00 | |
| > 100,000 | 0.00 | 0.00 | |
| Credit interest received | 0.00 |
| Statement Reflects | |||
| USD | |||
| Securities | Commodities | Total | |
| Ending Settled Cash | 50,000 | 20,000 | 70,000 |
Calculate interest on security account balance 50,000
| Tier Balance | Cash | Interest | Calculation |
| < 10,000 | 10,000 | 0.00 | (10,000 x 0/360) |
| 10,000 – 100,000 | 40,000 | 3.36 | [40,000 x (3.528%-0.5%)/360] |
| > 100,000 | 0.00 | 0.00 | |
| Credit interest received | 3.36 |
Calculate interest on commodity account balance 20,000
| Tier Balance | Cash | Interest | Calculation |
| < 10,000 | 10,000 | 0.00 | (10,000 x 0/360) |
| 10,000 – 100,000 | 10,000 | 0.84 | [10,000 x (3.528%-0.5%)/360] |
| > 100,000 | 0.00 | 0.00 | |
| Credit interest received | 0.84 |
| Statement Reflects | |||
| GBP | |||
| Securities | Commodities | Total | |
| Ending Settled Cash | -70,000 | 10,000 | -60,000 |
Calculate interest on security account balance -70,000
| Tier Balance | Cash | Interest | Calculation |
| < 60,000 | 60,000 | 9.76 | [60,000 x (4.439%+1.5%)/365] |
| 60,000 – 610,000 | 10,000 | 1.49 | [10,000 x (4.439%+1.0%)/365] |
| > 610,000 | 0.00 | 0.00 | |
| Debit interest charged | 11.25 |
Calculate interest on commodity account balance 10,000
| Tier Balance | Cash | Interest | Calculation |
| < 6,000 | 6,000 | 0.00 | (6,000 x 0/365) |
| 6,000 – 60,000 | 4,000 | 0.43 | [4,000 x (4.439%-0.5%)/365] |
| > 60,000 | 0.00 | 0.00 | |
| Credit interest received | 0.43 |
| Statement Reflects | |||
| EUR | |||
| Securities | Commodities | Total | |
| Ending Settled Cash | 75,000 | 25,000 | 100,000 |
- Assume account has short stock collateral value of EUR 70,000.
- Calculate adjusted settled cash balance for securities account = 75,000 – 70,000 = 5,000
Calculate interest on security account balance 5,000
| Tier Balance | Cash | Interest | Calculation |
| < 8,000 | 5,000 | 0.00 | (5,000 x 0/360) |
| 8,000 – 80,000 | 0.00 | 0.00 | |
| > 80,000 | 0.00 | 0.00 | |
| Credit interest received | 0.00 |
Calculate interest on commodity account balance 25,000
| Tier Balance | Cash | Interest | Calculation |
| < 8,000 | 8,000 | 0.00 | (8,000 x 0/360) |
| 8,000 – 80,000 | 17,000 | 0.75 | [17,000 x (2.08%-0.5%)/360] |
| > 80,000 | 0.00 | 0.00 | |
| Credit interest received | 0.75 |
Calculate interest on short stock value 70,000
| Tier Balance | Cash | Interest | Calculation |
| < 80,000 | 70,000 | 0.00 | (70,000 x 0/360) |
| > 80,000 | 0.00 | 0.00 | |
| Short credit interest received | 0.00 |
| Statement Reflects | |||
| USD | |||
| Securities | Commodities | Total | |
| Ending Settled Cash | 500,000 | 120,000 | 620,000 |
- Assume account has short stock collateral value of USD 680,000.
- Calculate adjusted settled cash balance for securities account = 500,000 – 680,000 = -180,000.
Calculate interest on security account balance -180,000
| Tier Balance | Cash | Interest | Calculation |
| < 100,000 | 100,000 | 13.97 | [100,000 x (3.528% + 1.5%)/360] |
| 100,000 – 1,000,000 | 80,000 | 10.06 | [80,000 x (3.528% + 1.0%)/360] |
| 1M – 3M | 0.00 | 0.00 | |
| > 3M | 0.00 | 0.00 | |
| Debit interest charged | 24.03 |
Calculate interest on commodity account balance 120,000
| Tier Balance | Cash | Interest | Calculation |
| < 10,000 | 10,000 | 0.00 | (10,000 x 0/360) |
| 10,000 – 100,000 | 90,000 | 7.57 | [90,000 x (3.528%-0.5%)/360] |
| > 100,000 | 20,000 | 1.82 | [20,000 x (3.528%-0.25%)/360] |
| Credit interest received | 9.39 |
Calculate interest on short stock value 680,000
| Tier Balance | Cash | Interest | Calculation |
| < 100,000 | 100,000 | 0.00 | (100,000 x 0/360) |
| 100,000 –1,000,000 | 580,000 | 36.70 | [580,000 x (3.528%-1.25%)/360] |
| 1M –3M | 0.00 | 0.00 | |
| > 3M | 0.00 | 0.00 | |
| Short credit interest received | 36.70 |
- 1Please see Universal Account page for description of account structure. Due to the different regulators -- CFTC for commodities and SEC for securities -- IB is not permitted to net the assets in a sub-account with those from the other sub-account.
- 2The new accrued cash shown after the above postings may not be zero. The residual balances reflect the continuing accruals for the first days of the current month. For example, if IB processes the final interest calculation on August 6, Accrued Cash will still show the activity from August 1 through August 6.