Interactive brokers deposit safety

A

alex314159

Hi,

I'm starting to have a decent balance on my account at IB (several hundred thousand USD) and I'm getting worried about the safety of these funds, say if IB went into trouble for instance. I'm wondering what do others have on account with IB, and if anyone has some idea re hedging. So far I'm thinking I could:
*open an account somewhere else and buy deep OTM puts on IB stock (expensive)
*take out money from my account and significantly increase the leverage of my positions - this has a cost (IB exposure fees), and is also a pain to manage as I'd occasionally need to transfer money for margin calls, take the money away whenever I'm far from from a margin call, etc.

Any help appreciated! Thanks,
 
I field these questions all the time for the clearing firms we introduce to. Your account is protected by SIPC and Excess SIPC. Sounds like you are not much above the protection, so I don't think this is an issue for you. If someone had a large account (many millions) or they are a fiduciary for other's money, like a hedge fund, there are some steps to take that offer some extra protection. You can:

-Keep some funds in an FDIC account and move money back and forth as you need it to the SIPC protected account.

-Purchase a T-bill. You will lose some buying power,and you will be borrowing money with each overnight purchase, but securities are treated differently than cash at SIPC during an event. Securities get transferred first then cash.

I can't tell you your money is SAFE, but in your situation, I would not be concerned if it were me.
 
I understand your concerns, but I still find it inconceivable that a "solution" that would involve probable margin calls can be either appropriate or necessary, here.
 
I would echo rmorse's comments and it sounds like you have some ideas already.

I've been with IB for many years and they have a strong balance sheet and have always behaved in a way that seems to hold their fiduciary responsibility in the highest regard.

Another option that I have engaged in over the years is to maintain a "reconstitution account" (with a bank) that is roughly equal to my brokerage account. In the unlikely event that the broker suddenly went under or I blew up the account, I could start fresh.
 
Typically what I do is keep most of the cash in the bank and use leveraged instruments. After a bad run I refund the account, during good runs I transfer to the bank.
 
There are many sophisticated custs who domicile millions, even tens of millions, at IB. Among life's worries, IB's stability isn't very high on the list.
 
The world felt that way with BS, LEH etc. Big is not always safer. Not having a trading desk and avoiding leveraged accounts would make a broker safer. Either way,any brokerage account around the SIPC limit should not be your concern.
 
ktm said:
Another option that I have engaged in over the years is to maintain a "reconstitution account" (with a bank) that is roughly equal to my brokerage account. In the unlikely event that the broker suddenly went under or I blew up the account, I could start fresh.
More...

Do you mind elaborating on this reconstitution account. Haven't heard about that before.
 
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