Interactive Brokers and registration of shares

P

Pasternak

I have had an account in IB for many years. However, I plan to transfer more money and will surpass the insurance limit (500 000) by a wide margin. As far as I know IB does not register share ownership in my name, but instead using "Street name registration". Put shortly, If I buy MSFT the shares are registered on IB, not me. So officially in the papers I'm not the owner of the shares. As far as I understand the shares are registered as an asset on IBs book and they maintain a liability towards me. I guess they do this because it's more convenient. What the situation is for foreign stocks I don't know (for example BASF shares bought on Xetra). Is this registered at IB or a depo in a foreign bank?

I know about SIPC and also that IB has an insurance in Lloyds for up to 30 mill (?).

But I'm wondering about what happens if IB goes bankrupt? If my shares are IBs asset I risk losing it all except for the SIPC (are they solvent in any case....?).

Does any know if there is any way to have registered in my own name?

As you can see, my faith in financial instituitions is close to nil....

Any thoughts welcome.
 
Over 20 banks have approached IB about buying it. Source IB conference call.
Over $65 billion has been deposited in IB. My theory is that IB will be taken over for it's technology.
 
Pasternak said:
I have had an account in IB for many years. However, I plan to transfer more money and will surpass the insurance limit (500 000) by a wide margin. As far as I know IB does not register share ownership in my name, but instead using "Street name registration". Put shortly, If I buy MSFT the shares are registered on IB, not me. So officially in the papers I'm not the owner of the shares. As far as I understand the shares are registered as an asset on IBs book and they maintain a liability towards me. I guess they do this because it's more convenient. What the situation is for foreign stocks I don't know (for example BASF shares bought on Xetra). Is this registered at IB or a depo in a foreign bank?

I know about SIPC and also that IB has an insurance in Lloyds for up to 30 mill (?).

But I'm wondering about what happens if IB goes bankrupt? If my shares are IBs asset I risk losing it all except for the SIPC (are they solvent in any case....?).

Does any know if there is any way to have registered in my own name?

As you can see, my faith in financial instituitions is close to nil....

Any thoughts welcome.
More...

I believe if you maintain a cash account shares can be registered in your name IE no margin and you have to wait for trades to settle.
 
Hi, I asked helpdesk, and they said no.

They say each customer is insured in Lloyds up to 30 mill. Still, for me it's unbelieveable that owners are not registered in a share register. I'm from Norway, and here all trades are registered in a private owned register. All trades are electronic anyway, so there is no cost involved. As soon as you have bought a stock, you automatically are out of the brokers system and you are the official owner.
 
I requested the option to have shares registered in my own name via a IB feature poll, back in 2011, in the wake of the MF Global fiasco.

https://www.interactivebrokers.com/en/?f=/en/general/poll/index.php?sid=7549

They declined to pursue this back then.

I hope that they "get religion" at some point as they pursue larger and larger clients, hedge and mutual funds and fiduciaries, that invest other people's money, and that require bulletproof safety for assets that they hold at a broker on behalf of their clients.

I am actually quite surprised that IB's management around founder Thomas Peterffy, who seems to be both very ambitious to grow the company yet equally security-conscious, have not yet moved into this direction. It seems such a no-brainer to me. With one step, you eliminate the last major advantage the large banks have over IB (when it comes to attract institutional clients), and bulletproof IB against a run-on-the-bank scenario.

They pointed at implementation problems, but, as you said, registration of shares in customer name is standard in many european countries and I have never heard about this causing any problems there.
 
Thanks for link. Excess SIPC capped at 150 m firmwide seems very little to me.

Do you have any options as where to bring my business? I'm not risking my money above SIPC insurance. Hell, I don't know if I trust SIPC either...
 
Pasternak,

1. Indeed, 150m pales compared to the billions in client money above the SIPC limit (and thus eligible for that insurance) that sits at IB. The insurance is nice to have, especially as it gives Lloyd's 150 million reasons to watch IB carefully, but in a real loss event might just pay out cents on the dollar.

2. Do you trust Lloyd's? You have the option to buy additional insurance from them, just for your IB account. Contact your IB sales representative. Prices (premiums) that I have seen are around 0.15pc a year for security values sitting in your IB account (the ones held in street name).

3. My IB account is way above the SIPC limit as well, but just for me personally I have decided not to take on additional insurance (yet). If I managed money for others, I would definitely do so however.

4. I am surprised to see that there is another person that is even more cautious on this than me ;-) So you don't even trust SIPC? I think it's almost certain they'd be backstopped by the Fed (that can print unlimited amounts of green paper) in case of real trouble.

5. I am an uninterrupted IB client for almost 15 years now, and since then I have read every of their press releases, watched every presentation, read their annual reports and listened to every earnings call (since they are public). My strong impression from there, the customer experience over the years, and management's talk and actions, is that IB is probably the best, most ethical and security-conscious brokerage firm on the planet. For example, IB was one of the first to mandate two-factor authentication via the security device, something that gives me great comfort every day. Peterffy is a programmer, he knows that every system and program connected to the net is potentially hackable. The security device is not connected to the net and comes via post, and thus is as safe as it gets. Their options market making business is set up in a way that ensures they make a big profit on any tail event (meltdown or meltup). They have progressively tightened customer margins, and charge customers with risky positions an exposure fee. All moves to limit risk. As I said, I find it inexplicable that they have not yet moved to a customer-name system or at least give their clients the option. But not giving up the hope yet.

6. If you are looking for IB alternatives, I recently came across
https://www.degiro.eu which could be or become a viable competitor.
 
Re: Registration of shares in IB's name

Could the reason be that it makes it easier for IB to sell them to short sellers? One of IB's advantage is its inventory of shares to sell short.



:)
 
OptionGuru said:
Re: Registration of shares in IB's name

Could the reason be that it makes it easier for IB to sell them to short sellers? One of IB's advantage is its inventory of shares to sell short.



:)
More...


Well, certainly, giving customers the option to register shares in their name would require additional and/or changed automated processes.

However, it's certainly not impossible.

IB today already borrows shares for you to short sell from other financial firms, in case they don't have inventory themselves. So the ability to borrow shares with another name on it is certainly not the issue.
 
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