Regardless of whether/how a firm "trades its own account" it's not supposed to impact customer segregated funds.
But if your firm steals from customers, cheats, lies, violates the rules... you've got a problem.
Most firms follow the rules.
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Can What Happened to MF Happen to IB?
- Thread starter catmango
- Start date
Regardless of whether/how a firm "trades its own account" it's not supposed to impact customer segregated funds.
But if your firm steals from customers, cheats, lies, violates the rules... you've got a problem.
Most firms follow the rules.
let that be a lesson to all the next time a politician gets back into the private sector. They forget it's not legal out here.Quote from Scataphagos:
Regardless of whether/how a firm "trades its own account" it's not supposed to impact customer segregated funds.
But if your firm steals from customers, cheats, lies, violates the rules... you've got a problem.
Most firms follow the rules.
Quote from Occam:
That is interesting, thanks. I've often wondered why the US doesn't have a centralized database where ownership of all securities is made clear and unambiguous.
Well, at least for stocks there is such system. It's called the stock register. Wall St just chooses to register customers' shares in street name.
IB CUSTOMERS: Please vote on my feature poll 7549 which would provide an inexpensive way to insure up to 100 percent account security even for large accounts by giving the customer the option to hold all or part of his shareholdings in "customer name" instead of "street name".
http://www.interactivebrokers.com/en/general/poll/index.php?sid=7549
Quote from jeb9999:
From the IB website:
"Customer securities accounts at Interactive Brokers are protected under SIPC up to $500,000 (with a cash sublimit of $250,000) and under Interactive Brokers' excess SIPC policy with Lloyd's of London insurers for up to an additional $30 million (with a cash sublimit of $900,000). Your stocks, options, warrants, debt instruments, and cash -- denominated in all currencies -- are covered by this protection. Futures, options on futures, and single stock futures are not covered, but available cash will be swept from your futures account to your securities account periodically to take advantage of SIPC and excess SIPC coverage to the greatest extent possible. As with all securities firms, this coverage provides protection against failure of a broker-dealer, not against loss of market value of securities."
I find it interesting that options are covered but futures are not. So if I buy a single stock future it isn't covered, but if i create a synthetic future with a long call and a short put at the same strike that position is covered under their insurance.
So there's a case for preferring a synthetic future to a real one, although they have the same profit/loss curve and very similar margin requirements.
Quote from Hedgehog1:
So, there you have it.
Unfortunately, a primebrokerage agreement, which is what IB's amounts to, is a bit short on the rights of customers. You are going to them. So, it's more a matter of open your wallet and repeat after me: "please help yourself".
.
Very good post Hedgehog1, thanks for sharing.
I have an account with IB but also feel that IB is rather vague on the protection offered to European based traders dealing with the IB (UK) Ltd side, whilst money is being held with IB LLC... Sounds shady doesn't it?
European accounts don't seem to get the same level of SIPC protection as US-based traders, and what use is the UK's FSA protection if the money is held with IB LLC? It is not difficult to envisage a situation where both SIPC and FSA pass the buck and you have no protection at all.
Perhaps someone from IB could clarify?
In light of the MF Global situation, these details (which I previously ignored) become a lot more important.
If you don't mind me asking Hedgehog1, which futures brokers do you feel do offer reasonably competitive rates and sufficient protection for UK/European based traders?
Quote from ids:
Tonkadad,
It is not that simple because futures P&L and options values are part of the equation but generally speaking money should just cover maintenance margin. Money transfers are done pretty much instantaneously from the software point of view. I cannot tell you how it is handled legally in accounting.
ids,
what is the $8.8B in 'trading assets' on IB's balance sheet? What about the $8.3B in trading liabilities '- financial instruments sold but not yet purchased, at fair value'? Is it fair to say IB is running some kind of large repo book(2x equity)?
http://investors.interactivebrokers.com/download/Q3_11_earnings_release.pdf
Quote from Daal:
ids,
what is the $8.8B in 'trading assets' on IB's balance sheet? What about the $8.3B in trading liabilities '- financial instruments sold but not yet purchased, at fair value'? Is it fair to say IB is running some kind of large repo book(2x equity)?
http://investors.interactivebrokers.com/download/Q3_11_earnings_release.pdf
Mostly long and short (liabilities) options, futures and stocks arising out of market making subsidiary timber hill
Quote from benwm:
If you don't mind me asking Hedgehog1, which futures brokers do you feel do offer reasonably competitive rates and sufficient protection for UK/European based traders? [/B]
Unfortunately, I'm still searching ... and, still waiting for a reply from IB's Compliance Dept. But reputation counts for something, as the CME has evidently decided, and I'm looking at e.g. Dorman.
What's the betting that my 30-day account opening window is up before I get a proper reply from IB Compliance?
I have, however, received this from IB Customer Services:
"Point 3. Unfortunately a UK resident can not open an account with IB LLC (US). UK residents account will always be registered with IB UK. "
Naturally, I would like to surmise that this is for the better protection of UK clients.
As a 30-year veteran of the investment business it is my experience, however, that the advent of investor protection legislation has, as a rule, only encouraged industry participants, that in fairness might in the past have felt obliged to step in to assist customers, to set terms and conditions that explicitly truncate their obligations to statutory limits.
What legal counsel would advise otherwise?
And, of course, it then becomes sound business practise for firms to play jurisdictional tic-tac-toe in streamlining their operations to minimise their obligations and contigent liabilities.... i.e. to customers.
Given an acceleration in the rate of industry structural change and a penchant for "light touch" regulatory regimes (read mercantilism & ignorance), it is easy to see customer money falling down the cracks; unless, of course, your firm is "too big to fail".
In the worst case, where your money is lost or stolen, you may have to litigate, e.g. in Illinois (or be forced to go to arbitration if you're with IB UK).
All credit to the CME for stepping up to the plate in support of MF Global customers. It makes me quite nostalgic.