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InteractiveBrokers "hyper-hypothecates" $14.5b of Customer Funds?
- Thread starter Chicago_CTA
- Start date
Quote from def:
Wow - pretty serious accusations here but how many of you really understand what hypothecation is? This is all about margin and stock loan.
This is a complete non-answer, even typical misleading PR bullshit.
The question is about re-hyposhitwhatever, not about margin or stock lending. You better come up with an accurate answer, and fast.
BTW, where is client cash invested? Is IB paying any interest?
I want my cash balances invested absolutely nowhere. Makes no sense to hold even T-bills as they pay nothing. Everything else is too risky.
Quote from drukes1234:
I understand all your points guys, I just don't understand the fear IF you trade equities.
You're missing the point. Yes, if you trade only equities and stay under the SIPC limit, you would likely get your money back--eventually--by the SIPC if your broker fails. But ask all the clients of MF Global, or any of the other failed brokerages in the past if they were happy about having to wrangle with the regulators just to get their money back, nevermind the opportunity cost that was lost by having the money and assets tied up in the interim.
The point is that most of us don't want to be put in the position of having to go through that. What we want and reasonably expect, is for there to be greater transparency and flow of information from the brokers themselves, or at least from the regulators, about their exact dealings, and precisely what risks exist to us the clients. Wouldn't it be better if we had better information in the first place, so that we could know if we were with a high risk outfit to begin with?
Think about what we've come to, where we now have to avoid trading an entire asset class and market that previously was fine? Think about how bad the environment has gotten that we have to abandon an entire market to think we are safe. And think about actual commodity hedgers and producers, some of whom got just as screwed in the MF Global collapse as speculators.
We now know that the simple bromide about client funds remaining segregated is meaningless in a world where regulators are inept or corrupt, loopholes abound, and the complexity of financial instruments and derivatives has reached a level that requires a PhD to understand the ramifications.
We live in a world of zero credibility now. The government's credibility is shot, the regulators' credibility is shot, and so are the players in the market. No one trusts anyone anymore, fraud and malfeasance is now the norm. Confidence is being destroyed at a rapid pace, and history tells us that putting your faith in the government to save you when things really get bad is scary proposition indeed.
So yeah, if we take everything at face value, the SIPC will save us if we trade only equities. Somehow I still don't sleep well at night thinking that's the only thing standing between me and a major loss of net worth anymore. YMMV.
Quote from zboy2854A:
We live in a world of zero credibility now. The government's credibility is shot, the regulators' credibility is shot, and so are the players in the market. No one trusts anyone anymore, fraud and malfeasance is now the norm. Confidence is being destroyed at a rapid pace, and history tells us that putting your faith in the government to save you when things really get bad is scary proposition indeed.
Exactly.
It's just stupid to trust the SIPC, or any other insurance scheme for that matter. When the shit really hits the fan, nobody is going to have enough money to pay for all the damages.
Quote from moo:
Exactly.
It's just stupid to trust the SIPC, or any other insurance scheme for that matter. When the shit really hits the fan, nobody is going to have enough money to pay for all the damages.
Yep. That we have to now cling to only equities and the SIPC as our lifeboats, and abandon trading other entire asset classes to feel safe, tells us just how sick and unstable our financial markets and systems now are.
Quote from Nick29:
IBKR does/did yes. Maybe they weren't aware of MFG's Hyper-Hypothecation.
Very, very doubtful that they didn't know about that. MFG was at least partially motivated to "gun it" because their interest income had dropped dramatically from 2005-2010.
Ironically, Bernanke has gotten his wish of driving everyone into "risk assets" by keeping rates at zero. Unfortunately, it's a roach motel when they all want out of this toxic Eurozone debt at the same time.