InteractiveBrokers "hyper-hypothecates" $14.5b of Customer Funds?

[braincell]

IB has two accounts for each customer; securities and commodities. The securities account is insured by SIPC. My concern is that IB never disclosed exactly how and when it shifts equity between those accounts based on the activity on the customer. That means if something happens, they can easily claim that the majority of the customer cash was in the commodities accounts because he traded futures at some point. It's very unclear and a bit of a concern to me.

It would be much better and safer if IB stopped doing this behind the curtain and displayed securities and commodities accounts precisely for each customer somwhere in account management pages.

 

[atticus]

Quote from Catoosa:

Well, only up to the limits of the federal insurance limits of $250K/$500K.

Of course, but IB offers private insurance as well. The debate is segregation.

 

[atticus]

Quote from braincell:

That means if something happens, they can easily claim that the majority of the customer cash was in the commodities accounts because he traded futures at some point. It's very unclear and a bit of a concern to me.

Not so if you're not trading futures!

 

[Filipp72]

Why somebody put $100.000 and other $250.000 for SIPC cash limit ???

 

[Catoosa]

Quote from atticus:

Of course, but IB offers private insurance as well. The debate is segregation.

You must be operating in a "dark room".

 

[rmorse]

Quote from Filipp72:

Why somebody put $100.000 and other $250.000 for SIPC cash limit ???

SIPC covers customer securities accounts up to $500,000 per customer, including a maximum of $250,000 for cash claims. And as others have pointed out, futures are NOT considered securities. Also, if you're a member of a prop/JBO broker dealer set up, you are NOT protected by SIPC at all. All Broker Dealer accounts are members of SIPC and pay dues, but are not entitled to protection for their securities or cash.

 

[lwlee]

According to Jefferies’ most recent Annual Report it had re-hypothecated $22.3 billion (in fair value) of assets in 2011 including government debt, asset backed securities, derivatives and corporate equity- that’s just $15 billion shy of Jefferies total on balance sheet assets of $37 billion.

I wonder what the Jefferies' CEO has to say now. They were banging on the drums really hard, saying how they were not like the rest and that the evil-doers were out to get them.

 

[Options12]

Quote from atticus:

Not so if you're not trading futures!

What about SSF at OneChicago. Are these classified as futures or securities?

 

[LEAPup]

From options xpress (glad I checked into that for my Wife's IRA. lol):

"How are accounts protected?
optionsXpress is a member of SIPC, the Securities Investor Protection Corporation, which protects against losses caused by the financial failure of the broker-dealer, but not against losses resulting from depreciation in a security’s value. Your optionsXpress accounts are protected by SIPC up to $500,000—including up to $100,000 for cash claims.

Additionally, on our own initiative and at no additional cost to you, optionsXpress has secured excess SIPC coverage offering your account additional account protection beyond the standard SIPC limits. optionsXpress’ excess SIPC policy covers in the aggregate up to $100,000,000, subject to a maximum limit of $24,500,000 per customer, $900,000 of which may be cash."


They're pointing out 100k in cash claim, but the SIPC website says 250k. No wonder the average investor is running away confused.

 

[Nick29]

If IB are "Hyper-Hypothecating" money to Timberland, that just blows my mind.