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Interactive Brokers margin rates

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Adam N.
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Are margin rates low at Interactive Brokers as of June 2024?

Interactive Brokers offers low margin rates for trading stocks, ETFs and other assets.

What is the IBKR margin rate?

At BrokerChooser, we regularly collect and update margin rate data along with other data sets for more than 100 brokers globally. At the time of writing, the IBKR margin rate for the most popular currencies are:

Margin rates at Interactive Brokers for different currencies in June 2024
Currency Margin rate value Margin rate class Industry average*
USD 6.8% Low 9.92%
GBP 6.7% Low 6.97%
EUR 5.5% Low 6.0%

*Calculated by comparing margin rates at more than 40 brokers reviewed by BrokerChooser. Data updated on June 12, 2024


My key findings in a nutshell
Adam
Adam Nasli
Trading • Safety • Market Analysis

I've thoroughly tested Interactive Brokers services with our analyst team by opening a real-money account and these are my most important findings:

  • To trade on margin at Interactive Brokers, you will need to open a margin account.
  • Interactive Brokers sets its own margin rate.
  • The margin rate at Interactive Brokers is the interest you pay on funds borrowed from the broker.
  • Margin rates tend to move in tandem with interest rates set by central banks.
  • The longer you keep a margin position open, the higher your cost will be.
  • Margin rates vary depending on the currency and the borrowed amount.
  • Margin rates are also applied in short selling.

Brokerage service highlights at Interactive Brokers

As a trader, you will need a reliable broker with low costs and an excellent service level if you are to successfully invest in the financial markets. Here are the most important characteristics of Interactive Brokers’s services.

Key features of Interactive Brokers services
💰 Deposit fee $0
💳 Deposit methods Bank transfer
💰 Withdrawal fee $0
💸 Account base currency AED, AUD, BGN, CAD, CHF, CNH, CZK, DKK, EUR, GBP, HKD, HUF, IDR, ILS, JPY, MXN, MYR, NOK, NZD, PLN, RON, SAR, SEK, SGD, USD, TRY, ZAR
💸 Minimum deposit $0
🗺️ Country of regulation USA, Ireland, UK, Hungary, India, Australia, Canada, Japan, Hong Kong, Singapore
🎮 Demo account provided Yes
📋 Read more Check out the Interactive Brokers review for 2024

Data updated on June 12, 2024

Looking for the best brokers for margin trading? You are in the right place. Our brokerage analysts compiled a list of the best brokers for margin trading in the world by checking their services and opening an account at each one of the reviewed brokers.

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Margin trading on Interactive Brokers

To trade on margin you have to open an Interactive Brokers margin account. This is a different type of account, separate from a cash account. On the surface, the margin account looks the same and has the same functionalities (i.e. charting, search tools and support are identical), but you need to meet a set of criteria for the margin account. When you trade on margin, IBKR lends you money and there are various legal and tax details that need to be settled for that.

Choosing your account type in the Interactive Brokers mobile app on an Apple iPhone.

As it is a US broker, the $2,000 minimum deposit requirement applies at IB if you want to trade on margin.

Margin requirement changes

The initial margin, which is also called a minimum account requirement, is set by the Financial Industry Regulatory Authority (FINRA). Brokers can only require margins that are higher than this. They can also set their own “house” requirements or raise their maintenance margin requirements for specific stocks. However, Interactive Brokers does not do this.

As an example, IBKR did increase its margin requirements during the 2020 U.S. elections. This was a unique move on the brokerage market, as other brokers took no similar steps. According to the email they sent out to users at the time, they did this because they expected huge volatility in certain stocks.

You might be required to complete a test to prove that you understand the risks associated with margin trading.

Types of margin accounts at Interactive Brokers

Interactive Brokers provides two types of margin accounts:

  • a rule-based account called ‘Reg T' and
  • a risk-based account called ‘Portfolio Margin’.

The difference between the two accounts is how margin requirements are calculated.

  • For a ‘Reg T’ account, margin requirements are calculated by the US Federal Reserve Board by governing and controlling the amount of credit that broker-dealers may make available to customers.
  • For a ‘Portfolio Margin’ account, the requirements are based on the Theoretical Intermarket Margin System (TIMS), which calculates the value of a portfolio given a series of hypothetical market scenarios and bases margin requirements on this information.

What is the margin rate?

Margin rates, sometimes called debit rates, refer to the interest rates charged by brokerage firms when investors borrow money to buy and sell stocks, ETFs or options on margin. This is called trading on margin and it means that you will use both your own money and the funds borrowed from the broker to purchase securities.

Why is this good? Because it allows you to open larger positions by investing a larger amount - or as they say in brokerage lingo - by increasing your buying power.

The margin rate is the interest that the broker charges on borrowed funds.

Each brokerage sets its own margin rates. Some brokers will quote the margin rate as an annual percentage rate while others will display it in swap points. The rate can vary depending on several factors, the most important being the currency in which the funds are borrowed and the actual amount of the money you are lent.

Generally speaking, margin rates are closely tied to the benchmark interest rate of the currency in which you borrow. If your broker lends you USD, the margin rate will most often be the US interest rate plus a markup that the broker adds.

Given that the US Fed, the nation's monetary authority hiked interest rates to their highest level in more than 20 years in July 2023, traders are faced with a high margin rate environment.

It is customary among brokers to apply a tiered system for their margin rates, meaning that the rate depends on the amount you borrow: the more money the broker lends you, the lower the margin rate will be.

Certain brokers will apply different margin rates for different types of trading accounts. Typically, a standard account will have higher rates than a premium account. The rates used by BrokerChooser refer to standard accounts.

Most brokers will calculate the margin rate on a daily basis but the amount you owe them will be charged to your account once a month. Brokers are required to disclose their margin rates to investors.

Brokers are required to disclose their margin rates to investors. However, keep in my that margin rates can change rapidly without preliminray warning from your broker.

Margin rates on short selling

Margin rates can also apply when you engage in short selling. Short selling means that you borrow shares from your broker and sell them with the expectation that the share price will decline. You will then repurchase the shares at a lower price and pocket the difference as your profit.

The margin rate for short selling is the interest rate charged by the broker on the borrowed funds used to facilitate the short sale. It is similar to the margin rates for stock trading and option trading.

Margin trading in the US

At US regulated brokers, you will need to open a margin account to be allowed to trade on margin. The mandatory minimum deposit for margin accounts is $2,000.

Margin trading in securities is governed by the SEC, FINRA and Regulation T, also known as Reg T, a rule implemented by the U.S. Federal Reserve Board.

Under Regulation T, the initial margin for most stocks is 50%. This means that investors must provide at least 50% of the purchase price in cash, while the remaining 50% can be borrowed from the broker. Brokers can only require margins that are higher than this.

Regulation T stipulates that short selling requires a deposit equal to 150% of the value of the position at the time the short sale is executed. This 150% includes the full value of the short (100%), plus an additional margin requirement of 50%.

FAQ

Why is Interactive Brokers's margin rate so low?

IBKR has a low margin rate because they make money on a number of other services they provide. These include monthly fees on IBKR Pro, subscription to market data, inactivity fees and others. This allows them to cut costs on other parts of their service, like providing loans for margin trading.

How does IBKR charge margin interest?

The interest margin is accrued daily, but it is charged monthly, on the third business day of the following month.

Is margin interest charged daily at Interactive Brokers?

No, it is charged monthly, on the third business day of the following month. However, it is accrued on a daily basis, meaning that it adds up each day.

How does Interactive Brokes calculate margin rates?

Interactive Brokers calculates margin rates by setting a reference benchmark rate for each currency (updated regularly), to which it adds a mark-up.

  • For IBKR Lite customers, the mark-up is the same regardless of the borrowed amount (e.g. 2.5% in the case of USD).
  • For IBKR Pro, the mark-up is lower and changes depending on the amount involved, decreasing as the size of the borrowed amount goes up. For example, for USD it is +1.5% for amounts under $100,000, while above $200 million it is just 0.5%.

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Further reading

Everything you find on BrokerChooser is based on reliable data and unbiased information. We combine our 10+ years finance experience with readers feedback. Read more about our methodology.

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Adam Nasli
Author of this article
I bring extensive financial expertise as one of BrokerChooser's earliest team members. Personally, I tested nearly all 100+ brokers on our site, opening real-money accounts, executing trades, assessing customer services, and providing firsthand assessment. My professional background includes roles in the banking sector and a degree from Central European University, where I teach finance. My passions lies in in-depth research of the financial industry, building trading algorithms, and managing long-term investments.
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