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Interest & Financing
Whereas many brokers pay little or no interest on idle balances in their securities and/or commodities accounts, Interactive Brokers pays market competitive rates. We use internationally recognized benchmarks for overnight deposits as a basis for determining the rates at which we pay and charge interest. 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 below. The current day benchmarks are as follows:
| Currency | Benchmark (BM) |
Rate |
| USD | Fed Funds Effective (Overnight Rate)
|
0.160%
|
| AUD | AUD Australian Dollar LIBOR (Spot-Next rate)
|
3.902%
|
| CAD | CAD LIBOR (Overnight rate)
|
0.992%
|
| CHF | Swiss Franc LIBOR (Spot-Next rate)
|
0.032%
|
| DKK |
0.340%
|
|
| EUR | EONIA (Euro Overnight Index Average)
|
0.330%
|
| GBP | GBP LIBOR (Overnight Rate)
|
0.552%
|
| HKD | HKD HIBOR (Overnight rate)
|
0.099%
|
| HUF | Budapest Interbank Offered Rate
|
6.340%
|
| ILS | Tel Aviv Interbank Offered O/N Rate
|
2.510%
|
| INR | India SBI Base Rate
|
11.750%
|
| JPY | JPY LIBOR (Spot-Next rate)
|
0.109%
|
| KRW | Korean Won KORIBOR (1 week)
|
3.260%
|
| MXN | Mexican Interbank TIIE (28 day rate)
|
4.760%
|
| NOK | NOK Tomorrow Next Deposit
|
1.550%
|
| NZD | New Zealand Dollar Official Cash Daily Rate
|
2.500%
|
| SEK | SEK STIBOR (Overnight Rate)
|
1.604%
|
| SGD | Singapore Dollar (O/N swap) Rate
|
0.096%
|
| USDLibor | 11 am GMT USD LIBOR (used only for Gold and Silver Borrow Fees)
|
0.155%
|
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.
Fed Funds Effective (USD only) is the volume weighted average of the transactions processed through the Federal Reserve between member banks. It is intended to reflect the best estimate of interbank financing activity for Reserve Bank members and is the reference for many short term money market transactions in the broader market.
LIBOR (many currencies) stands for London Inter-Bank Offered Rate. It is a daily fixing for deposits with durations from overnight to 1 year and is determined by a group of large London banks. It is the most widely used measurement for interest rates on most currencies outside the domestic market(s).
EONIA (EUR only) is the global standard for overnight Euro deposits and is determined by a weighted average of the actual transactions between major continental European banks mediated through the European Central Bank.
HIBOR (HKD only) is a daily fixing based on a group of large Hong Kong banks. The same methods and durations are set as for LIBOR currencies.
KORIBOR (KRW only) is an average of the leading interest rates for KRW as determined by a group of large Korean banks. The benchmark utilizes the KORIBOR with 1 week maturity.
TIIE (MXN only) is the interbank "equilibrium" rate based on the quotes provided by money center banks as calculated by the Mexican Central Bank. The benchmark TIIE is based on 28-day deposits so is atypical as a measure for short term funds (most currencies have an overnight or similar short term benchmark).
Overnight (O/N) rate is the most widely used short term benchmark and represents the rate for balances held from today until the next business day.
Spot-Next (S/N) refers to the rate on balances from the next business day to the business day thereafter. Due to time zone and other criteria, Spot-Next rates are sometimes used as the short-term reference.
Day-Count conventions: it is beyond the scope of this document to describe day-count conventions and their use in interest calculations. IB conforms to the international standards for day-counting wherein deposits rates for most currencies are expressed in terms of a 360 day year, while for exceptional currencies (ex: GBP) the convention is a 365 day year.
BM = Benchmark Rate
|
Currency
|
Tier I
Balance |
Amount Paid on
Balance > Tier I |
Tier II
Balance |
Amount Paid on
Balance > Tier II |
Tier III Balance |
Amount Paid on Balance > Tier III |
| USD | 10,000 | 0% (BM - 0.5%) | 100,000 | 0% (BM - 0.25%) | N/A | N/A |
| AUD | 15,000 | 3.402% (BM - 0.5%) | 150,000 | 3.652% (BM - 0.25%) | N/A | N/A |
| CAD | 12,500 | 0.492% (BM - 0.5%) | 125,000 | 0.742% (BM - 0.25%) | N/A | N/A |
| CHF | 12,000 | 0% (BM - 0.5%) | 120,000 | 0% (BM - 0.25%) | N/A | N/A |
| EUR | 8,000 | 0% (BM - 0.5%) | 80,000 | 0.08% (BM - 0.25%) | N/A | N/A |
| GBP | 7,000 | 0.052% (BM - 0.5%) | 70,000 | 0.302% (BM - 0.25%) | N/A | N/A |
| HKD | 78,000 | 0% (BM - 0.75%) | 780,000 | 0% (BM - 0.5%) | N/A | N/A |
| INR | All | 0% | N/A | N/A | N/A | N/A |
| JPY | 1,000,000 | 0% (BM - 0.5%) | 10,000,000 | 0% (BM - 0.25%) | N/A | N/A |
| KRW | 100,000,000 | 1% | 1,000,000,000 | 1.25% | N/A | N/A |
| MXN | 130,000 | 0.76% (BM - 4%) | 1,300,000 | 1.26% (BM - 3.5%) | N/A | N/A |
| NOK | 70,000 | 0% (BM - 2.5%) | 700,000 | 0% (BM - 2%) | N/A | N/A |
| NZD | 18,000 | 0% (BM - 2.5%) | 180,000 | 0.75% (BM - 1.75%) | 1,000,000 | 1.5% (BM - 1%) |
| SEK | 80,000 | 1.104% (BM - 0.5%) | 800,000 | 1.354% (BM - 0.25%) | N/A | N/A |
BM = Benchmark Rate
|
Currency
|
Tier I
Balance |
Amount Paid
on Balance > Tier I |
Tier II
Balance |
Amount Paid
on Balance > Tier II |
Tier III
Balance |
Amount Paid
on Balance > Tier III |
| USD | 100,000 | 0% (BM - 1.25%) | 1,000,000 | 0% (BM - 0.5%) | 3,000,000 | 0% (BM - 0.25%) |
| CAD | 125,000 | 0% (BM - 1.75%) | 1,050,000 | 0% (BM - 1.1%) | 3,150,000 | 0.092% (BM - 0.9%) |
| CHF | 120,000 | 0% (BM - 2.25%) | N/A | N/A | N/A | N/A |
| EUR | 80,000 | 0% (BM - 2.25%) | N/A | N/A | N/A | N/A |
| GBP | 70,000 | 0% (BM - 2.25%) | N/A | N/A | N/A | N/A |
| SEK |
800,000 | 0% (BM - 2.25%) | N/A | N/A | N/A | N/A |
| AUD |
150,000 | 1.652% (BM - 2.25%) | N/A | N/A | N/A | N/A |
| HKD |
780,000 | 0% (BM - 2.25%) | N/A | N/A | N/A | N/A |
| INR |
All | 0% | N/A | N/A | N/A | N/A |
- 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.
BM = Benchmark Rate
| Currency | Tier I Balance |
Amount Charged on Balance
<=Tier I |
Amount Charged on Balance
>Tier I |
Tier II
Balance |
Amount Charged on Balance
> Tier II |
Tier III
Balance |
Amount Charged on Balance
> Tier III |
Tier IV Balance |
Amount Charged on Balance >=Tier IV |
| USD | 100,000 | 1.66% (BM + 1.5%) | 1.16% (BM + 1%) |
1,000,000
|
0.66% (BM + 0.5%) | 3,000,000 | 0.41% (BM + 0.25%) | 50,000,000 | 1.41% (BM + 1.25%) |
| AUD | 150,000 | 5.402% (BM + 1.5%) | 4.902% (BM + 1%) | 1,500,000 | 4.402% (BM + 0.5%) | N/A | N/A | N/A | N/A |
| CAD | 125,000 | 2.492% (BM + 1.5%) |
1.992% (BM + 1%) |
1,250,000
|
1.492% (BM + 0.5%) | N/A | N/A | N/A | N/A |
| CHF | 120,000 | 1.532% (BM + 1.5%) | 1.032% (BM + 1%) | 1,200,000 | 0.532% (BM + 0.5%) | N/A | N/A | N/A | N/A |
| EUR | 80,000 | 1.83% (BM + 1.5%) | 1.33% (BM + 1%) | 800,000 | 0.83% (BM + 0.5%) | N/A | N/A | N/A | N/A |
| GBP | 70,000 | 2.052% (BM + 1.5%) | BM 1.552% (BM + 1%) | 700,000 | 1.052% (BM + 0.5%) | N/A | N/A | N/A | N/A |
| HKD | 780,000 | 1.599% (BM + 1.5%) | 1.099% (BM + 1%) | 7,800,000 | 0.599% (BM + 0.5%) | N/A | N/A | N/A | N/A |
| INR | All | 13.75% (BM + 2%) | 13.75% (BM + 2%) | N/A | N/A | N/A | N/A | N/A | N/A |
| JPY | 10,000,000 | 1.609% (BM + 1.5%) | 1.109% (BM + 1%) | 100,000,000 | 0.609% (BM + 0.5%) | N/A | N/A | N/A | N/A |
| KRW | 100,000,000 | 5.26% (BM + 2%) | 4.76% (BM + 1.5%) | 1,000,000,000 | 4.26% (BM + 1%) | N/A | N/A | N/A | N/A |
| MXN | 1,300,000 | 7.76% (BM + 3%) | 6.76% (BM + 2%) | 13,000,000 | 6.26% (BM + 1.5%) | N/A | N/A | N/A | N/A |
| NOK | 700,000 | 3.05% (BM + 1.5%) | 2.55% (BM + 1%) | 7,000,000 | 2.05% (BM + 0.5%) | N/A | N/A | N/A | N/A |
| NZD | 180,000 | 4% (BM + 1.5%) | 3.5% (BM + 1%) | 1,800,000 | 3.25% (BM + 0.75%) | N/A | N/A | N/A | N/A |
| SEK | 800,000 | 3.104% (BM + 1.5%) | 2.604% (BM + 1%) | 8,000,000 | 2.104% (BM + 0.5%) | N/A | N/A | N/A | N/A |
- IB charges a higher default interest rate for large debit cash balances. If you anticipate consistently having a large debit cash balance which would be affected by the Tier V interest rate, please contact the IB Funds & Banking department by telephone in order to arrange a review of the account balances and interest rates charged.
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 commodity sub-account (1)
- Cash balance in security sub-account (1)
- Market value of short stock positions
These balances are reported on the Daily Statement with the heading “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 value from the security sub-account “Ending Settled Cash”. Essentially, this pulls out funds derived from sales proceeds on short stock since they are calculated using different tiers.
AdjustedCash = EndingSettledCash - ShortStockValue
Step 4: For each of the 3 adjusted balances (commodity, adjusted security, 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 withdrawable funds. This avoids the problem of
accounts being closed and leaving negative balances later on.
- PATTERN DAY TRADING: accrued cash does not count toward Pattern Day Trading minimum balance requirements.
Every day, 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 (or USD equivalent), we will show the accrual on the Daily Statement. Accruals smaller than $1, are recorded in IB’s systems but are not reported on the statements. This is a temporary issue, and we expect to report all daily accruals on statements with a scheduled system upgrade in the near future.
Final Posting
At the end of the month, or within the first few days of the following month, the following steps are taken:
- IB recalculates all the interest amounts using the method described 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.
- IB determines the cumulative accrued cash for the previous month as the
sum of the individual days.
- We reverse this amount in the Accrued Cash sub-account at the beginning
of the following month. For example, if the accrued cash balance for July
2005 was positive, we apply a debit charge
to accrued cash in early August 2005.
- At the same time, we book the final interest calculation from step 1 to
the regular cash account. In effect, steps 3 and 4 convert “pending
cash” to “actual cash”. In the example above, we would credit
the cash account.
- These transactions(2) are reported on the Monthly Statement. Click here for full explanations about statements.
Definitions
Trade Date Cash versus Settlement Date (also called Value Date):
In most large financial transactions, there is a time delay between when the transaction is agreed to, and when it settles, i.e, when the actual payment occurs. For example, when purchasing a house, “Closing Date” is the date on which the monies and title are actually exchanged which can be several months after the purchase/sale was actually agreed to.
In the case of stocks (for example US stocks) there is a 3 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, 3 business days later crosses the weekend so normal settlement is the following Monday. Exchange and banking holidays falling within the settlement period will push back settlements.
Why is Settlement/Value 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 starting from settlement date.
Settlement/Value Dating is generally a minor consideration for stock, option, and future traders. However, due to the large amounts of capital involved, it is critical for FOREX and fixed income (bond or money market) traders to thoroughly understand value dating.
Examples
For all below examples assume benchmark rates as follows:
| Benchmark (BM) | Rate |
| US Dollar LIBOR (Overnight Rate) | 3.528% |
| EONIA (Euro Overnight Index Average) | 2.080% |
| GBP LIBOR (Overnight Rate) | 4.439% |
| Statement Reflects | |||
| USD | |||
| Securities | Commodities | Total | |
| Ending Settled Cash | 7,000 | 0.00 | 7,000 |
Calculate interest on security account balance 7,000
| Tier Balance | Cash | Interest | Calculation |
| < 10,000 | 7,000 | 0.00 | (7,000 x 0/360) |
| 10,000 – 100,000 | 0.00 | 0.00 | |
| > 100,000 | 0.00 | 0.00 | |
| Credit interest received | 0.00 |
| 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 | 3.36 | [40,000 x (3.528%-0.5%)/360] |
| > 100,000 | 0.00 | 0.00 | |
| Credit interest received | 3.36 |
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 | 0.84 | [10,000 x (3.528%-0.5%)/360] |
| > 100,000 | 0.00 | 0.00 | |
| Credit interest received | 0.84 |
| 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 |
| < 60,000 | 60,000 | 9.76 | [60,000 x (4.439%+1.5%)/365] |
| 60,000 – 610,000 | 10,000 | 1.49 | [10,000 x (4.439%+1.0%)/365] |
| > 610,000 | 0.00 | 0.00 | |
| Debit interest charged | 11.25 |
Calculate interest on commodity account balance 10,000
| Tier Balance | Cash | Interest | Calculation |
| < 6,000 | 6,000 | 0.00 | (6,000 x 0/365) |
| 6,000 – 60,000 | 4,000 | 0.43 | [4,000 x (4.439%-0.5%)/365] |
| > 60,000 | 0.00 | 0.00 | |
| Credit interest received | 0.43 |
| Statement Reflects | |||
| EUR | |||
| Securities | Commodities | Total | |
| Ending Settled Cash | 75,000 | 25,000 | 100,000 |
- Assume account has short stock market value of EUR 70,000 (manually sum “Value” of settled short stocks)
- Calculate adjusted settled cash balance for securities account = 75,000 – 70,000 = 5,000
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%-0.5%)/360] |
| > 80,000 | 0.00 | 0.00 | |
| Credit interest received | 0.75 |
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 |
| Statement Reflects | |||
| USD | |||
| Securities | Commodities | Total | |
| Ending Settled Cash | 500,000 | 120,000 | 620,000 |
- Assume account has short stock market value of USD 680,000 (manually sum “Value” of settled short stocks)
- Calculate adjusted settled cash balance for securities account = 500,000 – 680,000 = -180,000
Calculate interest on security account balance -180,000
| Tier Balance | Cash | Interest | Calculation |
| < 100,000 | 100,000 | 13.97 | [100,000 x (3.528% + 1.5%)/360] |
| 100,000 – 1,000,000 | 80,000 | 10.06 | [80,000 x (3.528% + 1.0%)/360] |
| 1M – 3M | 0.00 | 0.00 | |
| > 3M | 0.00 | 0.00 | |
| Debit interest charged | 24.03 |
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 | 7.57 | [90,000 x (3.528%-0.5%)/360] |
| > 100,000 | 20,000 | 1.82 | [20,000 x (3.528%-0.25%)/360] |
| Credit interest received | 9.39 |
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 | 36.70 | [580,000 x (3.528%-1.25%)/360] |
| 1M –3M | 0.00 | 0.00 | |
| > 3M | 0.00 | 0.00 | |
| Short credit interest received | 36.70 |
- 1Please see Universal Account 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.
- 2The 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.