Quote from bighitter1:
so jim who's safe for futures? we know ib sweeps every night so most of your money is sipc insured even if you trade futures. what about rcg are they safe?
I think IB is one of the safest companies at which to trade futures. The safest way to do it is to hold all of your cash in T-Bills in your IB securities account. If you then trade futures, IB extends a margin loan of up to 97% of the value of your T-bills, and transfers that margin loan to your IB futures account. If IB went bankrupt, this arrangement would make it impossible for IB to sieze your property legally in order to cover futures trading losses incurred by other customers, which is normally a serious risk when you trade futures at any broker. Another benefit of IB's T-bills technique is that the ENTIRE AMOUNT of your T-bills will be fully covered by $500,000 of SIPC insurance at ALL times, NOT just when unused portions of your funds are nightly swept from the futures account into your securities account. This is because the T-bills never leave your securities account. Another benefit is that your T-bills are covered at ALL times by IB's private Lloyd's of London insurance. Another benefit is that even though SIPC will not guarantee more than $500,000 in T-bills held in your IB securities account, SIPC still provides another benefit: it provides special procedures which will help you quickly get compensated
pro-rata for your T-bills in excess of the $500,000 limit, to the extent that customer property has not somehow been embezzled from IB's customer securities accounts, and has not been lost by the securities trading of other customers (which is far less likely for a securities account than in a futures account), and has not been covered by Lloyds. Another benefit is that your T-bills are held in an account regulated by the SEC, which, in the area of protecting retail customers, generally runs a much tighter ship than the CFTC, which regulates futures accounts.
Many futures brokers will allow you to deposit T-bills in order to meet margin requirements, HOWEVER, you can still lose them in a broker bankruptcy, if the broker is legally required to sieze part or all of your futures account in order to cover losses incurred by other customers. IB offers a superior T-bill technique, because IB allows you to hold the T-bills OUTSIDE of your futures account, and in a separate, SEC-regulated securities account, so that your T-bills CANNOT legally be seized in order to cover futures trading losses incurred by other customers.
If you want to compare RCG or other brokers, here are some things you need to compare:
-financial statements (a broker like IB, with a lot of its own capital, is safer, because the broker's capital would have to be exhausted before customer property could be siezed from non-defaulting customers to cover trading losses incurred by defaulting customers)
-regulatory history (embezzlement, hiring criminals, failing to meet regulatory broker capital requirements, etc.)
-honesty and reputation
-do they sweep excess funds and property to and from an insured account like IB
-do they allow T-bills to be held in an insured account separate from your futures account, or do they put your T-bills at elevated risk by holding them in your futures account?
-quality of risk management (do they have dangerously low margin requirements, or do they have conservatively higher requirements like IB? do they have a rigorous risk management system like IB's, which automatically and swiftly liquidates to eliminate margin violations, or do they indulge playas and highrollas like Refco did, because individual employees will get rich regardless of whether reckless customers make the entire company collapse?)
