Account protection - IB custody accounts

F

freedinner

In the aftermath of the MF Global and Peregrine frauds, we discussed ways how protection of brokerage accounts could be improved. I suggested to IB to give customers the option to hold some or all securities in "customer name" instead of "street name". Unfortunately, that feature request was quickly declined as requiring too many inventory tracking tasks and thus being unworkable.

Others suggested to "marry" a brokerage account with a FDIC insured bank account and thus for example being able to trade futures at IB while margin assets are enjoying FDIC protection.

While I haven't heard any replies from IB to my repeated lobbying on several levels on this issue, I recently found out about this IB web page through a Google search:

http://www.interactivebrokers.com/en/?f=/en/software/pdfhighlights/PDF-CustodyAccounts.php

"The Custody Account constitutes a tri-party agreement between IB, the custodial bank holding the customer's assets, and the IB customer. Assets at the custodial bank are reflected in the customers IB trading account and used to margin trades."

I don't know whether thats a new offer or not, but, at least for institutional accounts, IB seems to offer such a "combined account" now.
 
Quote from freedinner:

In the aftermath of the MF Global and Peregrine frauds, we discussed ways how protection of brokerage accounts could be improved. I suggested to IB to give customers the option to hold some or all securities in "customer name" instead of "street name". Unfortunately, that feature request was quickly declined as requiring too many inventory tracking tasks and thus being unworkable.

Others suggested to "marry" a brokerage account with a FDIC insured bank account and thus for example being able to trade futures at IB while margin assets are enjoying FDIC protection.

While I haven't heard any replies from IB to my repeated lobbying on several levels on this issue, I recently found out about this IB web page through a Google search:

http://www.interactivebrokers.com/en/?f=/en/software/pdfhighlights/PDF-CustodyAccounts.php

"The Custody Account constitutes a tri-party agreement between IB, the custodial bank holding the customer's assets, and the IB customer. Assets at the custodial bank are reflected in the customers IB trading account and used to margin trades."

I don't know whether thats a new offer or not, but, at least for institutional accounts, IB seems to offer such a "combined account" now.
More...

What can I say... not for you man, doubt they'll ever offering something like that to an individual and even small institutions, that doesn't come cheap. But hey, there's still counterparty risk, it's just not IB...
 
There seems to be a lot of unknown about the actual protection offered to non US account holders. Customers at IB UK for ex. ,
I am not sure they are covered by SIPC, IB in fact created confusion with documents stating these customers were not covered by SIPC. However representatives have maintained that they are covered, so what to believe ?
 
As I understand, non-US customer have account in IB US is also covered by SIPC. If you open account in UK, it should be covered by equivalent organization in UK
 
Can someone please tell me that customers of IB UK are without a shadow of a doubt covered by SIPC, and not by the UK protection scheme (£50k) ?

IB representatives say SIPC applies, however 1) IB docs for CFD trading approval at UK subsidiary say something to the effect IB UK customers are not covered by SIPC , 2) I myself doubt that in case of a MF style collapse SIPC will compensate non US customers of foreign subsidiaries.

I find it disturbing that IB reps just say yes it's covered and that the UK website makes no mention of IB UK Ltd only "Interactive Brokers" (I guess to be construed as IB LLC) .


http://www.interactivebrokers.co.uk/en/index.php?f=ibgStrength&p=acc
 
IB LLC (US) is forcing all customers trading non-US derivatives to open subaccounts with IB.UK as this type of instruments won't be tradeable any longer through an IB LLC account.Deadline was April 15.
I appears that IB.UK will act from now on in a dual function:

For US-side traded products it will act as introducing broker to carrying broker (self-clearing) IB LLC.As SIPC and excess SIPC protection is attached to the clearing firm,securities segment accounts opened with IB.UK trading US-side products should have the same account protection as accounts opened with IB.LLC US.
This is confirmed by the fact that the IB regional U.K website shows exactly the same account protection provisions as the U.S site.

The big difference,however,will be from now on,if IB.UK acts as carrying broker/clearer for the non-US derivatives traded in the
now obligatory Ib.UK subaccounts:
IB has stated clearly that these new accounts won't enjoy any longer the account protection they had when exactly the same products were traded in a IB.LLC -based account (except futures,options on futures,forex which anyway aren't SIPC protected).

This means for IB customers who have been migrated by force to IB.UK,that they have been deprived of 99.75% of the hitherto existing account protection (30.5 mio USD SIPC plus excess SIPC (Lloyd's) vs. 50 K GBP.
And IB has the cheekiness to sell this forced account change (customers who don't accept won't be able to trade these non-US derivatives anymore) as an improvement.
:confused:
 
I have been an IB UK client for many years. I recall having their account protection scheme confirmed somewhere in 2008-2009 during the subprime hassle, and decided to redo it based on the discussion in this thread. Here's the e-mail I got from their customer service:

<quote>

Dear Dr. I******

Please be advised that IB-UK client will be under the same account protection IBLLC client. So SIPC also applies to IB-UK client. Thank you.

Should you need further assistance, please feel free to contact us.

Best regards,
Dee W
IB Customer Service

</quote>

Quote from trade2live:

There seems to be a lot of unknown about the actual protection offered to non US account holders. Customers at IB UK for ex. ,
I am not sure they are covered by SIPC, IB in fact created confusion with documents stating these customers were not covered by SIPC. However representatives have maintained that they are covered, so what to believe ?
More...
 
It is all said in my post,and I can support all what is said there by
corresponding IB communiques.
As long as you trade through IB.UK US-side products like stocks and options on stocks,as well as options on equity indices,i.e products classified under SIPC rules as securities,you are covered by SIPC and excess SIPC coverage.Commodities,options on index futures and forex,though, have never been covered by this kind of account protection.

As IB since April 15 (extended to Apr.29 due to certain resistance
of affected customers,including myself) isn't allowing trading of non-US derivatives (a move that will be extended later on to non-US stocks and stock options,as well as forex) anymore,those customers have only 2 choices:either stop trading in these products or open sub-accounts with IB.UK.In the latter case they will only count with the meager FSCS compensation of 50 K GBP for this sector of their trading (compared with 30.5 mio USD previously).

Whatever may have told you or me IB CSR in this regard should be taken with a grain of salt.They seem slightly challenged with the actual and quite surprising move.Stick to the corresponding IB communiques and Knowledge Base info on which this post is based.
 
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