Interactive Brokers calculates an internal funding rate based on a combination of internationally recognized reference rates on overnight deposits (ex: Fed funds, LIBOR), bank deposit rates, and real-time market rates from the world's largest and most liquid market, the interbank short-term currency swap market.
While central banks and major money-center banks set and publish reference rates for interest dependent investments, these rates often do not reflect the exact investment costs/opportunities seen in interbank and commercial transactions. IBKR's interest model starts with the reference rates and incorporates the dynamic market pricing to produce a midpoint or "benchmark".
IBKR adds a spread around the benchmark to determine deposit and borrowing rates applicable to client balances in each currency. Spreads are tiered such that larger balances receive more favorable interest treatment due to smaller spreads around the benchmark.
IBKR's benchmark for each currency is the reference rate around which our credit, debit, stock loan and other interest rate linked calculations are determined. IBKR uses a combination of internationally recognized reference rates (such as LIBOR, Fed Funds, etc), bank deposit rates, and dynamic interbank rates determined from foreign exchange and money markets to calculate an IBKR Reference Benchmark rate.
For more information about IBKR reference benchmark click here.
For information regarding the various external reference rates that contribute to the IBKR Reference Benchmark rate click here.