Trading on margin means borrowing funds against your existing collateral to trade more.
Initial Margin determines how much collateral you need to open a position.
Maintenance Margin defines how much collateral you need to keep a position.
The rules for margin trading are different between USA-listed and Japan-listed securities.
Interest Charged on Margin Loans
Unrealized Losses (Price Fall)
With other Japanese brokers, you are charged interest on the entire position value that you purchase on margin, resulting in higher borrowing fees overall. With an IBSJ Margin Account, you only pay interest on the borrowed amount.
| IBSJ Margin Account | Typical Margin Account | ||||||
|---|---|---|---|---|---|---|---|
| Starting Cash | Stock Purchased | Margin Rate | Amount Borrowed | Daily Interest Change | Amount Borrowed | Daily Interest Change | Savings |
| JPY 1,000,000 | JPY 1,500,000 | 1.8% | JPY 500,000 | JPY 25 | JPY 1,500,000 | JPY 75 | JPY 50 |
| USD 100,000 | USD 150,000 | 5.83% | USD 50,000 | USD 8.10 | USD 150,000 | USD 24.29 | USD 16.19 |
To determine how much you can purchase, your account’s Available Funds must be enough to meet the Initial Margin of your order. We calculate Available Funds using the following formula:
Available funds = Net Liquidation Value (NLV) – Total Initial Margin Requirements
For the case of securities trading, NLV is the current market value of all your securities plus any cash balance in your account, and the value of any open option positions.
Total Initial Margin Requirements: This is the sum of the Initial margin requirements for all your current positions.
To maintain your portfolio, you must ensure you have enough Net Liquidation Value (NLV) to meet the maintenance margin requirements.
Excess Liquidity = NLV – Maintenance Margin Requirement
If your account's excess liquidity becomes negative, it means you do not have enough equity to meet the margin requirements. Your account becomes subject to liquidation by IBKR, potentially without prior notice.
For example, suppose you have JPY 1,000,000 in cash, which you use to buy JPY 1,500,000 worth of securities (1,500 shares at JPY 1,000).
If the Initial and Maintenance Margin requirements were the same, even a small price drop after buying on margin could immediately reduce your NLV below the required level and trigger liquidation of your positions.
Unrealized gains on collateral stock increase your Net Liquidation Value (NLV), which in turn increases your available funds / excess liquidity and allows you to buy more with the same collateral. However, unrealized gains on margin stock do not count towards available funds / excess liquidity.
Unrealized losses on both collateral and margin positions reduce your Available Funds / Excess Liquidity. If your NLV becomes smaller than your maintenance margin requirements, your account has a margin deficit and IBKR may liquidate your positions to bring your account back into compliance.