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I Think I just Got Bought In: No Info Or Warning From Horrendous Interactive Brokers

August 5, 2010 at 9:53 am by Timothy Sykes

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  • JohnnyV

    IB communicates the potential for buy ins the day before. I have been bought in several times from IB and ALWAYS have received communication the previous day. See below for IB procedures.

    I wonder if you are willing to share the extract from your IB statement that shows it was a buy in and not a standard buy to cover.

    Buy-in Procedure for Short Sale Transactions
    The following procedure relates to short sale transactions that fail to settle on the normal (T+3) settlement date. IB’s implementation of the SEC regulations is as follows:

    1. On the standard settlement date, at approximately 14:30 EST, IB will make an estimate of the transactions that have actually settled, including any borrow transactions required. Historically, stock borrowing activity is completed early in the morning of settlement day. With the 9/2008 rules, we observe settlement activity continuing right up to the DTC cutoff at 15:10 EST. Accordingly, our 14:30 estimation is a compromise which, while it does not include the last 40 minutes of settlement activity (typically less than 10% of the total activity), it does provide a longer time period to provide notification and to allow clients to make trading decisions before the end of the trading session at 16:00.

    2. IB will disseminate an indication of possible buy-ins at about 14:50. Clients should recognize that these notifications communicate only the possibility, not the certainty, that we will be unable to make timely delivery thereby necessitating a buy-in. The purpose of the communication is to allow clients an opportunity to repurchase the short securities themselves thereby retaining greater control over their portfolios.

    3. At about 17:00, IB will reconcile any late settlements as well as client transactions up to the end of the regular trading session at 16:00 EST. IB will consider the net of all trades on the day when determining the position, including any new short sales. Trades after 16:00 will not be included in our position reconciliation. IB will then calculate the expected buy-in requirement based on complete information.

    4. On the morning of the next business day (generally the fourth day after trade date, also called “T+4″), and prior to the start of trading, IB will make a final attempt to locate and borrow the required securities. In the event we are able to do so, IB will send a notification reporting on an late borrow activity. The notification will confirm positions to be bought in.

    5. IB will attempt to post the bookings prior to the start of trading at 09:30. Occasionally, it may take longer to correct the positions visible via the TWS but the adjustments will be visible in the trades window so it should be evident to clients for whom this real-time information is important.

    6. On, or immediately after, the commencement of trading on T+4, IB will execute transactions in the open market to effect the actual buy-in, as required by the SEC rules. In case the buy-in transactions occur at multiple prices, we will calculate the volume weighted average price for the buy-ins.

    7. On the statement of the 4th day, IB will book the buy-in trades with the code B.

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