Interactive Brokers: Liquidation Warning

Hey guys, something strange has happened to my IB account today, and I wonder if anyone could help to explain. This morning I got an email from IB:

Liquidation Warning

Excess Liquidity URGENT: Please note that the qualifying equity within your account (i.e., Equity with Loan Value) is insufficient to satisfy the margin requirement and, to restore margin compliance, liquidation of positions may commence without further notice.

Note: Cash accounts are subject to liquidation if assessed a fee in excess of the cash balance on hand and may therefore receive this notice if their cash balance is < 5% of the market value of securities held.

I just logged into IB in the afternoon and saw that this “liquidation” has actually taken place:

So for some reason it automatically sold 1 USD.CHF, then it sold 2 USD.CHF, and then finally it sold 1 TSLA share. I don’t like this. Why did this happen? To my knowledge, before this, I had a cash position of around 3 USD and 0 CHF. But it looks as if I had a negative CHF balance and he tried to fix that? I can’t find the right report to show me something like a currency balance history. I have a cash account.

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Sounds like there was a fee in chf, maybe check the activity report.

Some info from the activity statement for May:

So yes, in May there was a CHF interest of 1.98 for April, then in June there was 2.02 for May. Eventually I had no cash left in the account, so it automatically sold 1 TSLA share.

But my CHF cash is 0, so what gives? Why is there a fee being charged each month?

Edit: I think I had over 100’000 CHF cash in the account for a few days in April. Could this interest be charged on this CHF? And then the June interest was charged because I had negative CHF in the account?

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Yes this is probably the reason for the negative interest. You can check interest rates here:

But the fact that they liquidate assets over like 1$ in a portfolio which is probably a couple 100K/1+M in your case is hilarious. But I guess there is just a fix algorithm doing that. You could try asking the support, but I don’t know if this helps.

They should be a bit more flexible imho when it comes to really small negative balances (like less than 1% of the portfolio value), but then again: They are already extremely cheap so their efficiency has disadvantages in such cases.

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He has a cash account, that is why

Why don’t you have a margin account?

Because when I created the account, I chose the cash option, as I thought the margin account is more advanced. I didn’t change it since. Moreover, I wanted to avoid any potential mistakes on my part, like making an FX trade that creates a negative open position or something. IB interface is unintuitive enough to make you doubt in what is the actual status of your account. There is the available cash and the settled cash, the realized and unrealized performance, the virtual FX positions, etc etc.

In hindsight, I would have gone with a margin account. A few times I wanted to buy some stock because the price was right, but I needed to send the money first. It surely cost me a few thousand.

OK, so I was charged 1.98 CHF interest in April because I had a large CHF cash position for a couple of days, before I bought some stock. But why was I charged again 2.02 CHF in May? Was I this time charged for having a -1.98 CHF balance throughout entire month? I made no transfers/orders in May.

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Switching is easy and fast. I also started with a cash account and changed it to margin later.

Makes life so much easier.

I always keep 2kchf and usd just in case I need to pay some fees

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Me too, but my last purchase was really razor-thin close to my balance, so I was left with almost nothing.

Maybe the 2.02 CHF were from the $2 exchange fee?

The CHF 2.02 is a “CHF Credit Interest for May-2022”.

What is “accrual reversal”?

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If I understand correctly it’s when they actually charge the interests earned or to be paid to the cash balance.
So it seems you were also charged some interest for May…

The fee is almost certainly negative interest. That they would not send you a warning requesting you to add money to your account to cover the fees is disappointing/concerning. I guess the takeaway is to always keep some cash in the account to cover possible fees.

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I get why I got charged interest for April, it is even called “credit interest” and not debit. Totally no idea about May. I made no transactions in May, apart from being charged with that negative interest. So for the most of May, my CHF balance has been -1.98. Still, on June 3 I was charged another CHF credit interest. I Just charged my account with a few hundred CHF and will keep it like this and see what happens in July. If they charge me again, I’ll open a ticket or sth.

Why not just switch to margin account and nevet bother again?

With a margin account, I would still be charged interest for having too large position in CHF. And if my cash balance ran into negative, I would maybe not even know it until I got a warning. What is the maximum negative cash balance that you can have at IB?

You know, I do not intend to make any more trades on IB, just hold my stock there. So I don’t need the account to be more capable. At the same time I don’t want to screw sth up. IB does not let you know when some things happen, it just silently charges interest or some other fee, when you do something wrong. I don’t want to have to check it regularly if I didn’t miss out on something and now I’m strongly in the negative.

I surely wouldn’t like to keep a negative cash balance, so the margin account would maybe improve a bit on the situation, but still the best thing is to keep a few hundred bucks in cash, in order to cover any unexpected costs and not be liquidated.

Even better: both in CHF and in USD :v:

You have to check in the account details, I think it is the Excess liquidity. With your assets it will be in the “hundreds of thousands” magnitude → nothing to worry about…

I currently have ca. -190 kCHF

Nice flex :smiley: But congrats!