Interactive Brokers, a global trading platform with a presence in Singapore and Hong Kong, is moving to protect its business in the run-up to the U.S. elections in November as it expects a surge in volatility.
U.S. electronic brokerage Interactive Brokers, which also has offices in Hong Kong and Singapore, will increase its margin requirements for some clients by as much as 35 percent above normal leading up to the presidential elections in November, according to a client letter seen by finews.asia.
«Elevated option implied volatilities indicate that the markets will be confronting elevated volatility both before and after the November 2020 election,» said the company in the letter to clients. «IBKR shares that sentiment and believes it’s appropriate to start controlling leverage in a measured fashion in advance.»
Increase in Margin Requirements
The implementation of the increase in margin requirements will be made gradually each day, the company said. The start of the program of initial margin requirements is set for September 28 and will carry through October 23. Maintenance margin requirements will increase similarly between October 5 and October 30.
The move by the company comes as it expects an increase in market volatility in connection with the elections that are scheduled for November 3. The contest between Joe Biden, the challenger, and Donald Trump, the incumbent, is likely to be close. With cities in the U.S. hit by protests over racial injustice and the use of police force, some observers have suggested that the elections may be marred by further violence and that either of the two political parties may contest the outcome.
Substantial Losses
Volatility had also risen earlier this year when governments acted to contain the pandemic. The Northern hemisphere may be about to enter a second wave of the pandemic, with countries including Spain, France and the U.K. implementing new partial restrictions. Stock markets this week reacted with substantial losses to the concern about a second wave.
