Is anyone else worried about Penson Financial?

[opt789]

In my opinion, it is highly unlikely that Penson will go under in a way that would cause customers to lose their deposits. But just in case I keep the majority of my account in the FDIC insured securities side of TDA/thinkorswim. Per MFG if you guess that a 30% haircut or so is about as bad as it will be, then only keep 40% or less in your Penson futures account, so that way your worst case should be losing 12% of that trading account.

If you are smart and have more than one trading account, and only have a reasonable portion of your liquid net worth in all your trading accounts, then that 12% loss in one account will not amount to all that much overall.

 

[Swan Noir]

Why would you guess on a sample of one -- MF Global -- what the worst case on a second would be. i do not think Penson will necessarily go belly up but what is the upside here? And what is the upside in thinking you can see into the future regarding the maximum haircut?

Quote from opt789:

In my opinion, it is highly unlikely that Penson will go under in a way that would cause customers to lose their deposits. But just in case I keep the majority of my account in the FDIC insured securities side of TDA/thinkorswim. Per MFG if you guess that a 30% haircut or so is about as bad as it will be, then only keep 40% or less in your Penson futures account, so that way your worst case should be losing 12% of that trading account.

If you are smart and have more than one trading account, and only have a reasonable portion of your liquid net worth in all your trading accounts, then that 12% loss in one account will not amount to all that much overall.

 

[opt789]

Quote from Swan Noir:

Why would you guess on a sample of one -- MF Global -- what the worst case on a second would be. i do not think Penson will necessarily go belly up but what is the upside here? And what is the upside in thinking you can see into the future regarding the maximum haircut?

I didn’t use the words “worst case” I was simply saying since we only have one example of anyone ever losing any of their deposit in a futures account that we can just use that. As a trader I don’t claim to “know” anything about anything, I merely assign logical probabilities.

I like my account at thinkorswim, and because of the way I trade their shortcomings effect me very little, and therefore I have to use Penson if I keep an account with them. How many firms are there again where you can trade securities and futures, and your cash is protected by FDIC rather than the highly suspect SIPC? I will state that I assign a very low probability of me losing any of my deposit at Penson, but since I can’t know that I have reduced the % of my total liquid net worth to a very manageable number.

 

[FrankSlaughtery]

i'm going to stop speculating re pnsn. i have no idea if they're going to go belly up - that's the whole point - no one knows. mf was one of the biggest fcm's before they blew up just like bsc and leh. anyways even using that 12% hypo haircut, it's not just the small haircut that matters that could hurt you - it's how soon you got your money and/or positions transferred to another broker.

for ex, assume you're short 10 ES at 1253 and your broker goes on to broker heaven or hell, and your accounts are frozen until they're transferred a week later which would be pretty quick. what happens if you can't manage your trade in the mean time? what happens if there's surprise fed action/intervention/world peace breaks out/whatever and the ES goes up 50 handles before you can close it out?

on the flip side say you're long and mr. black swan decides to visit the mtk and the ES drops 75 handles?

or for the options traders, what happens if you have cars w/ a close expiry and you're either long or short and all the greeks are just waiting to blow you up b/c you can't close and/or hedge?

long winded post i know - just saying that any eventual return of your money is not the only worry if you blow up before then b/c your account is frozen. as many other posters have said, have multiple accounts, esp so you can put on hedges.

 

[zdreg]

nobody has bought them out informs you of the risk.

 

[Swan Noir]

Ahh ... the logical probabilities derived from a sample of one. My sincere apologies. I thought you were using a less robust statistical construct.

I stand corrected.

Quote from opt789:

I didn�t use the words �worst case� I was simply saying since we only have one example of anyone ever losing any of their deposit in a futures account that we can just use that. As a trader I don�t claim to �know� anything about anything, I merely assign logical probabilities.

I like my account at thinkorswim, and because of the way I trade their shortcomings effect me very little, and therefore I have to use Penson if I keep an account with them. How many firms are there again where you can trade securities and futures, and your cash is protected by FDIC rather than the highly suspect SIPC? I will state that I assign a very low probability of me losing any of my deposit at Penson, but since I can�t know that I have reduced the % of my total liquid net worth to a very manageable number.

 

[Swan Noir]

This post outlines the real level of risk which is significant.

Quote from FrankSlaughtery:

i'm going to stop speculating re pnsn. i have no idea if they're going to go belly up - that's the whole point - no one knows. mf was one of the biggest fcm's before they blew up just like bsc and leh. anyways even using that 12% hypo haircut, it's not just the small haircut that matters that could hurt you - it's how soon you got your money and/or positions transferred to another broker.

for ex, assume you're short 10 ES at 1253 and your broker goes on to broker heaven or hell, and your accounts are frozen until they're transferred a week later which would be pretty quick. what happens if you can't manage your trade in the mean time? what happens if there's surprise fed action/intervention/world peace breaks out/whatever and the ES goes up 50 handles before you can close it out?

on the flip side say you're long and mr. black swan decides to visit the mtk and the ES drops 75 handles?

or for the options traders, what happens if you have cars w/ a close expiry and you're either long or short and all the greeks are just waiting to blow you up b/c you can't close and/or hedge?

long winded post i know - just saying that any eventual return of your money is not the only worry if you blow up before then b/c your account is frozen. as many other posters have said, have multiple accounts, esp so you can put on hedges.

 

[GTS]

Quote from FrankSlaughtery:

for ex, assume you're short 10 ES at 1253 and your broker goes on to broker heaven or hell, and your accounts are frozen until they're transferred a week later which would be pretty quick. what happens if you can't manage your trade in the mean time? what happens if there's surprise fed action/intervention/world peace breaks out/whatever and the ES goes up 50 handles before you can close it out?

You enter an offsetting trade (long 10 ES) in your other futures account (different broker) so that you are effectively flat.

If you don't have a second futures account then you have more to worry about then just your broker going MF on you - technology issues happen all the time that could leave you with no way to close a position.

 

[opt789]

Quote from Swan Noir:

Ahh ... the logical probabilities derived from a sample of one. My sincere apologies. I thought you were using a less robust statistical construct.

I stand corrected.

Wow, you really have problems don’t you. That is not even remotely what I wrote.
I am a numbers guy not a wordsmith, so I am at a loss as to how to properly depict how unreservedly obtuse you are.

Twice now you have not read what I wrote, then intentionally misstated what I wrote to prove some completely irrelevant point to yourself. Since you add nothing to this discussion, hopefully at least you have made yourself fell better.

 

[Swan Noir]

And what happens if there is a spike during which your margin is exceeded in your "MF" account and your position is closed by a trustee or the clearing house and they get around to telling you that days later?

Then your hedge is no longer a hedge but a position you do not even know you have. You really do not want to have open positions you can't control. Scores of locals were in that spot when MF went down and the fear was palpable.

Quote from GTS:

You enter an offsetting trade (long 10 ES) in your other futures account (different broker) so that you are effectively flat.

If you don't have a second futures account then you have more to worry about then just your broker going MF on you - technology issues happen all the time that could leave you with no way to close a position.