“…the markets will be confronting elevated volatility both before and after the November 2020 election.“
(by Half Dollar) Hat tip to the reader who sent me this email.
He has sent me reliable information before, so while I don’t have an Interactive Brokers account of my own, I have no reason not to believe in the authenticity of this email, and a quick search online shows it is indeed legit.
I mean, even the Financial Times is reporting on it.
Anyway, check out this email (bold added for emphasis and commentary):
Margin Increase Dear Client,
As you’ve likely observed, elevated option implied volatilities indicate that the markets will be confronting elevated volatility both before and after the November 2020 election. IBKR shares that sentiment and believe it’s appropriate to start controlling leverage in a measured fashion in advance.
Consequently, to protect IBKR and its customers, IBKR will increase margin requirements by as much as 35% above normal margin requirements leading up to the November U.S. election. To illustrate, consider a Reg. T margin account with stock XYZ having an Initial Margin requirement of 50% and a Maintenance Margin requirement of 25%. With the increase fully implemented, the new requirements would be 67.5% Initial and 33.75% Maintenance. Accounts subject to risk based margin will have their scanning ranges increased in a similar manner.
This will be implemented gradually each day, increasing Initial margin requirements from normal levels starting September 28th to a rate that will be 35% higher by October 23rd. Maintenance margin requirements will increase in a similar manner between October 5th and October 30th. The new requirements will be implemented each day, after the market closes in New York, and will be effective the next trading day.
IBKR may make additional changes to the margin on certain products, or all products, depending on volatility. This includes changes built into the standard margin model as well as any new house margin requirements that may be imposed.
Interactive Brokers Client ServicesInteractive Brokers LLC,
If you ask me, and if the stock market is selling off, that seems like a ratcheting up of the selling.
does it not?
Said differently, is a crashing stock market, in part because of the margin hikes, a self-fulfilling prophecy?
Of course, the Fed is unaudited and unaccountable, and even if they were audited, I’m pretty confident we’d be shown fabricated books and not the real thing, so who’s to say the ESF, the Fed, or agents acting on behalf of one or both, collectively known as the Cartel, won’t step in to hit the bid?
Alternatively, if the cartel wanted to bring down the markets, with the margin hikes coming from Interactive Brokers, and likely others to follow, the cartel wouldn’t have to hit that “sell” button too many times.
Please excuse the crappy copy-paste of the reader’s email, for it’s the content that matters, and I wanted to maintain his privacy, or hers, or whatever.