from Patrick McKenzie | by Patrick McKenzie

I’m going to elude naming the bank, but I just got a friendly message from Interactive Brokers saying that accounts with a concentrated position in that bank’s preferred shares would effective immediately be margined based on a bespoke stress test and not the usual formulas.

The stress test is going to simulate outcomes between -100% and +30%.

“Why are you concentrated in a single bank’s preferred stock?” I am not, but a SQL query might suggest to my brokerage that I am in a single account, hence getting this message. The position is worth less than my laptop.

“What does it say that a brokerage is worried about a bank preferred stock potentially going to zero?” What do you think it says.

*elide, obviously