Interest and Financing


Overview

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:


Benchmark Rates as of 20100902
Currency
Benchmark (BM)
Rate
USD
Fed Funds Effective1 (Overnight Rate)
0.190%
AUD
AUD Australian Dollar LIBOR1 (Spot-Next rate)
4.562%
CAD
CAD LIBOR1 (Overnight rate)
0.790%
CHF
Swiss Franc LIBOR1 (Spot-Next rate)
0.095%
EUR
EONIA1 (Euro Overnight Index Average)
0.364%
GBP
GBP LIBOR1 (Overnight Rate)
0.549%
HKD
HKD HIBOR1 (Overnight rate)
0.040%
INR
India SBI Prime (Prime lending rate of the State Bank of India)
11.750%
JPY
JPY LIBOR1 (Spot-Next rate)
0.105%
KRW
Korean Won KORIBOR1 (1 week)
2.290%
MXN
Mexican Interbank TIIE (28 day rate)
4.920%
NOK
Norwegian Krone
2.050%
NZD
New Zealand Dollar Official Cash Daily Rate
3.000%
SEK
SEK STIBOR1 (Overnight Rate)
0.603%
SGD
Singapore Dollar (O/N swap) Rate
0.264%

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.

Interest Paid to You on Positive (Credit) Cash Balances

BM = Benchmark Rate

Currency
Tier I
Balance
Cutoff
Tier II
Balance
Cutoff
Amount Paid
on Your Balance Amount
Between the Tier I and II Cutoffs
Amount Paid
on Your Balance Amount
Above the Tier II Cutoff
USD 10,000 100,000 0%
(BM - 0.5%)		 0%
(BM - 0.25%)
AUD 12,000 120,000 4.062%
(BM - 0.5%)		 4.312%
(BM - 0.25%)
CAD 11,000 110,000 0.29%
(BM - 0.5%)		 0.54%
(BM - 0.25%)
CHF 12,000 120,000 0%
(BM - 0.5%)		 0%
(BM - 0.25%)
EUR 8,000 80,000 0%
(BM - 0.5%)		 0.114%
(BM - 0.25%)
GBP 7,000 70,000 0.049%
(BM - 0.5%)		 0.299%
(BM - 0.25%)
HKD 78,000 780,000 0%
(BM - 0.75%)		 0%
(BM - 0.5%)
JPY 1,000,000 10,000,000 0%
(BM - 0.5%)		 0%
(BM - 0.25%)
KRW 12,000,000 120,000,000 1% 1.25%
MXN 125,000 1,250,000 0.92%
(BM - 4%)		 1.42%
(BM - 3.5%)
NOK 65,000 650,000 0%
(BM - 2.5%)		 0.05%
(BM - 2%)
NZD 15,000 150,000 0.5%
(BM - 2.5%)		 1.25%
(BM - 1.75%)
SEK 75,000 750,000 0.103%
(BM - 0.5%)		 0.353%
(BM - 0.25%)



Interest Paid to You on Short Sale Proceeds Cash Balances

BM = Benchmark Rate

Currency
Tier I
Balance
Cutoff
Tier II
Balance
Cutoff
Tier III
Balance
Cutoff
Amount Paid
on Your Balance Amount
Between
the Tier I and II Cutoffs
Amount Paid
on Your Balance Amount
Between the Tier II and III
Cutoffs
Amount Paid
on Your Balance Amount
Above the Tier III
Cutoff
USD 100,000 1,000,000 3,000,000 0%
(BM - 1.25%)		 0%
(BM - 0.5%)		 0%
(BM - 0.25%)
CAD 110,000 1,100,000 3,300,000 0%
(BM - 1.75%) 		0%
(BM - 1.1%) 		0%
(BM - 0.9%)
CHF 120,000 N/A N/A 0%
(BM - 2.25%)		 N/A N/A
EUR 80,000 N/A N/A 0%
(BM - 2.25%)		 N/A N/A
GBP 70,000 N/A N/A 0%
(BM - 2.25%)		 N/A N/A
SEK 750,000 N/A N/A 0%
(BM - 2.25%)		 N/A N/A
AUD 120,000 N/A N/A 2.312%
(BM - 2.25%)		 N/A N/A
HKD 780,000 N/A N/A 0%
(BM - 2.25%)		 N/A N/A

Notes:
  • 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.
Interest Charged to You on Negative (Debit) Cash Balances

BM = Benchmark Rate

When calculating rates, keep in mind that IB uses a blended rate based on the tiers below. For example, for a balance over 1,000,000 USD, the first 100,000 is charged at the Tier I rate, the next 900,000 at the Tier II rate, etc. See the Calculations and Examples page for more details.

 
Balance Cutoffs
Amount Charged on Balances:


Currency


Tier I


Tier II


Tier III
  

Below Tier I
Cutoff
Between
Tier I & Tier II Cutoffs
Between
Tier II & Tier III
Cutoffs

Above Tier III
Cutoff
USD 100,000 1,000,000 3,000,000   1.69%
(BM + 1.5%)		 1.19%
(BM + 1%)		 0.69%
(BM + 0.5%)		 Greater of 0.5%
or
(BM + 0.25%)(1)
AUD 120,000 1,200,000 No Tier III   6.062%
(BM + 1.5%)		 5.562%
(BM + 1%)		 5.062%
(BM + 0.5%)(1)		 5.062%
(BM + 0.5%)(1)
CAD 110,000 1,100,000 No Tier III   2.29%
(BM + 1.5%)
 1.79%
(BM + 1%)		 1.29%
(BM + 0.5%)(1)		 1.29%
(BM + 0.5%)(1)
CHF 120,000 1,200,000 No Tier III   1.595%
(BM + 1.5%)		 1.095%
(BM + 1%)		 0.595%
(BM + 0.5%)(1)		 0.595%
(BM + 0.5%)(1)
EUR 80,000 800,000 No Tier III   1.864%
(BM + 1.5%)		 1.364%
(BM + 1%)		 0.864%
(BM + 0.5%)(1)		 0.864%
(BM + 0.5%)(1)
GBP 70,000 700,000 No Tier III   2.049%
(BM + 1.5%)		 1.549%
(BM + 1%)		 1.049%
(BM + 0.5%)(1)		 1.049%
(BM + 0.5%)(1)
HKD 780,000 7,800,000 No Tier III   1.54%
(BM + 1.5%)		 1.04%
(BM + 1%)		 0.54%
(BM + 0.5%)(1)		 0.54%
(BM + 0.5%)(1)
JPY 10,000,000 100,000,000 No Tier III   1.605%
(BM + 1.5%)		 1.105%
(BM + 1%)		 0.605%
(BM + 0.5%)(1)		 0.605%
(BM + 0.5%)(1)
KRW 120,000,000 1,200,000,000 No Tier III   4.29%
(BM + 2%)		 3.79%
(BM + 1.5%)		 3.29%
(BM + 1%)(1)		 3.29%
(BM + 1%)(1)
MXN 1,250,000 12,500,000 No Tier III   7.92%
(BM + 3%)		 6.92%
(BM + 2%)		 6.42%
(BM + 1.5%)(1)		 6.42%
(BM + 1.5%)(1)
NOK 650,000 6,500,000 No Tier III   3.55%
(BM + 1.5%)		 3.05%
(BM + 1%)		 2.55%
(BM + 0.5%)(1)		 2.55%
(BM + 0.5%)(1)
NZD 150,000 1,500,000 No Tier III   4.5%
(BM + 1.5%)		 4%
(BM + 1%)		 3.75%
(BM + 0.75%)(1)		 3.75%
(BM + 0.75%)(1)
SEK 750,000 7,500,000 No Tier III   2.103%
(BM + 1.5%)		 1.603%
(BM + 1%)		 1.103%
(BM + 0.5%)(1)		 1.103%
(BM + 0.5%) (1)
SGD(1) N/A N/A N/A   2.264%
(BM + 2%) (2)		 2.264%
(BM + 2%) (2)		 2.264%
(BM + 2%)(2)		 2.264%
(BM + 2%)(2)

Notes:
  • [1] Under certain circumstances, balances greater than USD 100 million, or 100 times the Tier II balance reflected in non-USD currencies, or greater than 140,000,000 SGD may be subject to a service charge if not pre-arranged with us. These circumstances include:
       a. Trades executed away from us and transferred into your account, creating a short cash balance in excess of the above criteria.
       b. Withdrawals creating a short cash balance in excess of the above criteria.
  • [2] The same rate applies to all balance amounts for SGD; there are no tiers.

Calculations

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 security sub-account (1)
  • Cash balance in commodity sub-account (1)
  • Collateral balance for settled short stock positions

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, then multiplying by the number of shares.

Collateral Balance = (stock A prior day closing price x 102%, rounded up) x (number of shares stock A) + (stock B prior day closing price x 102%, rounded up) x (number of shares stock B)

These balances are reported on the Daily Statement under Ending Settled Cash.

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 three adjusted balances (adjusted security, commodity 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 funds available for withdrawal. This avoids the problem of having closed accounts with negative balances.
     
  • PATTERN DAY TRADING: accrued cash does not count toward Pattern Day Trading minimum balance requirements.

Everyday, 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 IB systems but are not reported on the statements.



Final Posting

At the end of the month, or within the first few days of the following month, the following steps are taken:

  1. IB recalculates all the interest amounts using the calculations 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.
     
  2. IB determines the cumulative accrued cash for the previous month as the sum of the individual days.
     
  3. IB reverses this amount in the Accrued Cash sub-account at the beginning of the following month. For example, if the accrued cash balance for July was positive, we apply a debit charge to accrued cash in early August.
     
  4. Simultaneously, we book the final interest calculation from Step 1 above to the regular cash account. In effect, Steps 3 and 4 above convert “pending cash” to “actual cash.”
     
  5. These transactions(2) are reported on the Monthly Statement. Click here for full explanations of our statements.


Trade Date versus Settlement Date (or Value Date)

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 three 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, three 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.

Why is Settlement Date 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 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.


Notes:
  • [1] Please see Universal Account section of the Margin Overview 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.
  • [2] The 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.
Examples

For questions about interest rate issues, please use the Inquiry Ticket or Chat system located at the top of Account Management.

For all below examples assume benchmark rates as follows:

Benchmark (BM) Rate
US Dollar Fed Funds Effective 1.00%
EONIA (Euro Overnight Index Average) 2.080%
GBP LIBOR (Overnight Rate) 4.439%

To find the Tier Balance used with the benchmark interest rate, see the Interest Paid to You and Interest Charged to You tabs above and refer to the (BM - x.xx%) calculations.

Example 1 - Interest Paid to You (USD)

When you have an excess positive cash balance, we'll pay you daily interest on that balance as follows:


Statement Reflects
USD
  Securities Commodities Total
Ending Settled Cash 50,000 0.00 50,000
Tier Balance Cash Interest Calculation
< 10,000 10,000 0.00 (10,000 x 0/360)
10,000 – 100,000 40,000 0.56 [40,000 x (1.00%-0.50%)/360]
> 100,000 0.00 0.00  
Credit interest received   0.56  

 

Example 2 - Interest Charged to You (USD)

When you borrow money, we'll charge you daily interest on your borrowed money as follows:


Statement Reflects
USD
  Securities Commodities Total
Ending Settled Cash -500,000 0 -500,000
Tier Balance Cash Interest Calculation
100,000 -100,000 6.94 [100,000 x (1.00% + 1.50%)/360]
100,000 - 1,000,000 -400,000 22.22 [400,000 x (1.00% + 1.00%)/360]
1,000,000 0.00 0.00  
Debit interest charged   29.16  

 

Example 3 - Interest Paid to You on Short Sale Proceeds

When you sell stock short and receive cash proceeds, we'll pay you daily interest on those proceeds as follows:


Statement Reflects
USD
  Securities Commodities Total
Short Sales Proceeds 1,500,000 0 1,500,000
Excess Cash 150,000 0 150,000
Ending Settled Cash 1,650,000 0 1,650,000

Calculate interest on short stock proceeds value 1,500,000

Tier Balance Cash Interest Calculation
< 100,000 100,000 0.00 No payment on balances < 100,000
100,000 - 1,000,000 900,000 0.00 [900,000 x (1.00%-1.25%)/360]
1,000,000 - 3,000,000 500,000 6.94 [500,000 x (1.00%-0.50%)/360]
Short credit interest received   6.94  

Calculate interest on security account excess cash balance 150,000

Tier Balance Cash Interest Calculation
< 10,000 10,000 0.00 (10,000 x 0/360)
10,000 - 100,000 90,000 1.25 [90,000 x (1.00%-0.50%)/360]
> 100,000 50,000 1.04 [50,000 x (1.00%-0.25%)/360]
Credit interest received   2.29  

 


Example 4 - Interest Paid to You on Positive Cash Balances

When you have a positive cash balance in your securities and commodities accounts, we'll pay you daily interest on those balances as follows:


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 0.56 [40,000 x (1.00%-0.50%)/360]
> 100,000 0.00 0.00  
Credit interest received   0.56  

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 0.14 [10,000 x (1.00%-0.50%)/360]
> 100,000 0.00 0.00  
Credit interest received   0.14  


Example 5 - Interest Charged to You on a Negative Cash Balance and Interest Paid to You on a Credit Balance

When you have a negative (debit) cash balance in your securities account and a positive (credit) balance in your commodities account, we'll charge you daily interest on the debit balance and pay you daily interest on the credit balance as follows:


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
< 70,000 70,000 11.39 [70,000 x (4.439%+1.50%)/365]
70,000 - 650,000 0.00 0.00  
> 650,000 0.00 0.00  
Debit interest charged   11.39  

Calculate interest on commodity account balance 10,000

Tier Balance Cash Interest Calculation
< 7,000 7,000 0.00 (7,000 x 0/365)
7,000 - 70,000 3,000 0.32 [3,000 x (4.439%-0.50%)/365]
> 70,000 0.00 0.00  
Credit interest received   0.32  


Example 6 - Interest Paid to You on Short Sale Cash Proceeds and Excess Cash in a Securities and Commodities Account

Statement Reflects
EUR
  Securities Commodities Total
Short Cash Proceeds 70,000 - 70,000
Excess Cash 5,000 25,000 30,000
Ending Settled Cash 75,000 25,000 100,000

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  

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%-0.50%)/360]
> 80,000 0.00 0.00  
Credit interest received   0.75  

Example 7 - Interest Paid to You on Short Sale Cash Proceeds and Excess Cash, and Interest Charged to You on a Debit Balance

In this example, you have securities short sale cash proceeds, and an Excess Cash (credit) balance in your Commodities account, but you also have a negative (debit) balance from borrowed cash. We'll charge you daily interest on the debit balance and pay you daily interest on the credit balance as follows:


Statement Reflects
USD
  Securities Commodities Total
Short Sale Cash Proceeds 680,000 - 680,000
Borrowed Cash (180,000) - (180,000)
Excess Cash - 120,000 120,000
Ending Settled Cash 500,000 120,000 620,000

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 0.00 [580,000 x (1.00%-1.25%)/360]
1M -3M 0.00 0.00  
> 3M 0.00 0.00  
Short credit interest received   0.00  


Calculate interest on security account balance -180,000

Tier Balance Cash Interest Calculation
< 100,000 100,000 6.94 [100,000 x (1.00% + 1.50%)/360]
100,000 - 1,000,000 80,000 4.44 [80,000 x (1.00% + 1.00%)/360]
1M – 3M 0.00 0.00  
> 3M 0.00 0.00  
Debit interest charged   11.38  

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 1.25 [90,000 x (1.00%-0.50%)/360]
> 100,000 20,000 0.42 [20,000 x (1.00%-0.25%)/360]
Credit interest received   1.67