Forex Margin Requirements
Forex Margin Overview
Forex Margin Requirements
Note
Clients with IBLLC accounts or IB UK accounts carried by IBLLC, and Fully Disclosed Broker Clients must be Eligible Contract Participants to be eligible to trade Cash Forex. An Eligible Contract Participant is generally an individual or organization with assets of over $10 MM (or $5 MM if trades are hedging). The complete definition is located in Section 1a(18) of the Commodity Exchange Act. For more information about the Commodity Exchange Act, see the U.S. Commodity Futures Trading Commission website, or read the complete definition here.
Forex are global products and not connected to a specific country or region. The margin requirements are outlined in the section below, but may be subject to change depending on the rules of local regulators.
All assets in each currency are combined to determine a single net asset value in that currency. Separate margin requirement calculations are used when determining the amount of funds available for withdrawal and the amount of funds available for trading. When determining the amount of funds available for withdrawal, the margin for non-base currency assets is determined by taking the margin rate tables below times the net asset value in the currency. There is no margin for base currency assets.
Margin Requirements
The following margin rates generally apply to all customers. In various jurisdictions, local regulators require different and/or higher margin rates. If the local margin rates are higher than our margin rates, then the margin rates required by local regulators will apply. Otherwise, our margin rates listed below apply.
Separate margin requirements are used when determining the amount of funds available for withdrawal and the amount of funds available for trading. For more information, see Knowledge Base articles KB970 - Currency Margin Calculation and KB971 - Currency Margin Calculation (Withdrawals). Margin requirement for FX balances will be the greater of the calculation in KB970 or Margin for Cash Forex Positions shown below.
| Currency | Initial Margin | Maintenance Margin | NFA Margin on Cash Forex Position Only 1 |
|---|
Margin for Cash Forex Positions
Margin for Cash Forex positions is calculated as follows:
- For each currency with a negative cash balance, offset with positive non-cash asset value in the same currency;
- For each currency with remaining positive non-cash asset value, use it to offset remaining negative cash balance in other currencies. Offset the currency with the highest margin rate first.
- Use total net liquidation value to offset remaining negative cash balances. Offset the currency with the highest margin rate first.
- If there are negative cash balances left, they are paired up with positive cash balances to calculate margin. The pairing algorithm previously developed for our currency margin is used.
Examples
The following exchange rates and margin rates are used in the examples below. The rates are intended for illustrative purposed only and do not represent actual margin rates.
| Currency | Exchange rate to USD | Our Margin Rate | NFA Margin Rate |
|---|---|---|---|
| HKD | 0.125 | 3% | 5% |
| USD | 1 | 2.5% | N/A |
| EUR | 1.25 | 2.5% | N/A |
| NZD | 0.8 | 10% | N/A |
Example 1: Total Net Liquidation Value = 5,000.00 USD
| Currency | Cash Value | Other Asset Value | Total Asset Value | Cash Forex Balance | Cash Forex Balance (USD) |
|---|---|---|---|---|---|
| HKD | -120.000 | 0 | –120,000 | –80,000 | –10,000 |
| USD | 20,000 | 0 | N/A | N/A | N/A |
Cash Forex position is -80,000 HKD vs 10,000 USD.
Margin is 10,000 USD * 5% = 500 USD.
Example 2: Total Net Liquidation Value = 5,000.00 USD
| Currency | Cash Value | Other Asset Value | Total Asset Value | Cash Forex Balance | Cash Forex Balance (USD) |
|---|---|---|---|---|---|
| HKD | -120.000 | 40,000 | –80,000 | –40,000 | –5,000 |
| USD | 35,000 | –20,000 | N/A | N/A | 0 |
Cash Forex position is -40,000 HKD vs 5,000 USD.
Margin is 5,000 USD * 5% = 250 USD.
Example 3: Total Net Liquidation Value = 5,000.00 USD
| Currency | Cash Value | Other Asset Value | Total Asset Value | Cash Forex Balance | Cash Forex Balance (USD) |
|---|---|---|---|---|---|
| HKD | 120.000 | 240,000 | 0 | 0 | 0 |
| USD | –10,000 | 0 | 0 | 0 | 0 |
–120,000 HKD cash is offset by 120,000 HKD non-cash asset value.
–10,000 USD cash is offset by 80,000 HKD non-cash asset value.
There is no Cash Forex position.
Margin = 0.
Example 4: Total Net Liquidation Value = 5,000.00 USD
| Currency | Cash Value | Other Asset Value | Total Asset Value | Cash Forex Balance | Cash Forex Balance (USD) |
|---|---|---|---|---|---|
| HKD | 120.000 | 0 | –120,000 | –80,000 | –10,000 |
| USD | –10,000 | 0 | –10,000 | –10,000 | –10,000 |
| EUR | 10,000 | 0 | N/A | N/A | N/A |
| NZD | 21.875 | 0 | N/A | N/A | N/A |
Short balances in USD and HKD are paired up with long balances in EUR and NZD to form FX positions as follows:
- –10,000 USD vs 8,000 EUR. Margin is 10,000 USD * 2.5% = 250 USD
- –20,000 HKD vs 2,000 EUR. Margin is 2500 USD * 5% = 125 USD
- –60,000 HKD vs 9,375 NZD. Margin 7500 USD * 10% = 750 USD
Total Margin = 1125 USD. Note that net liquidation value is used once to offset HKD, but not used to offset USD.
Additional Margin Requirements
For Residents of the United States:
Use the following links to view other margin requirements:
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Disclosures
- The NFA is a self-regulatory organization for the U.S. futures industry that supervises Forex activity in regulated Forex Dealer Members and Retail Foreign Exchange Dealers.
- US IRA margin accounts are never allowed to borrow non-base currencies.
- IBKR house margin requirements may be greater than rule-based margin.