Is anyone else worried about Penson Financial?

No ... the CME (or whoever the primary exchange for Penson is) is all over them ... like flies on shit. There are no surprises here. If the plug is pulled the account transfers will be prepacked and happen in days not weeks. That's why there has been no mad scramble by the IB's. I am sure they have been reassured by the regulators and Penson's primary exchange.

Still no reason to leave a nickle exposed if you have your doubts (any doubts) as to their viability but this is not MF Global. The exchanges and the regulators have had this under close watch for months. If it goes ... it goes efficiently with a minimum of downtime. It would not surprise me if they closed the till at 5PM on a Tuesday and you found out on Wednesday morning that your cash and positions would be available at IB or somewhere else at the opening bell on Thursday

Quote from jackhappy2:

Is this how the process would look?

If Penson goes under, all of the brokerages that use them would come to a halt. It might take months for the Penson to be sold and SIPC to pay out claims. After that process is finished, would each brokerage would take their customer accounts to a new clearing firm? Or would all accounts just cease to exist and you'd have to take your assets and open a new account somewhere?
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Quote from Swan Noir:

No ... the CME (or whoever the primary exchange for Penson is) is all over them ... like flies on shit. There are no surprises here. If the plug is pulled the account transfers will be prepacked and happen in days not weeks. That's why there has been no mad scramble by the IB's. I am sure they have been reassured by the regulators and Penson's primary exchange.

Still no reason to leave a nickle exposed if you have your doubts (any doubts) as to their viability but this is not MF Global. The exchanges and the regulators have had this under close watch for months. If it goes ... it goes efficiently with a minimum of downtime. It would not surprise me if they closed the till at 5PM on a Tuesday and you found out on Wednesday morning that your cash and positions would be available at IB or somewhere else at the opening bell on Thursday
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not to create arguments on a sat morning but here's my $0.02...

re "CME is all over them"...my trust in cme is shaken after the mf incident. i still trust that they would be financially able to act as a counterparty to every trade however my trust in their ability to run the back office as well is not so strong

re the accounts being switched overnight...for futures maybe but what about securities? as another poster said it still sucks to eventually get all of your money back but be without access to it in the meantime esp when it could be a few months

re being reassured by regulators...i almost spit up my red bull all over the screen. the regulators couldn't find their ass w/ two hands and a flashlight. enough said. it's up to us traders to take proactive steps to protect ourselves. the provider of gubmit cheese won't come riding over the nearest hill to save us.

i'll admit i'm extremely cynical when it comes to the gov and their ability to do anything right esp when it comes to trading and the instances where they have proving their incompetence are legion. there are many specific and actionable steps a trader can take to help mitigate risks in trading and et is a great source of sharing ideas. i for one never want to be 100% dependent on the sipc to pull me out of the fire.
 
I have no quibble with your skepticism. Anyone who is not in a doubting mood when it comes to these clowns needs professional help. But to be knee jerk gloomy ignores the facts. In this specific case they know nearly to the penny where Penson stands and if there are shortfalls it would have been shut shortly after MF Global.

Both the securities and futures businesses are more or less fixed cost operations. Once the machine is built and the overhead incurred it becomes a question of how much you can push through that machine. The economics of taking on thousands of additional accounts and a number of IB's (aka low overhead sales forces) are compelling. Interactive would certainly have taken MF Global's accounts except for the financial and legal mess.

In this business what a failed firm has actually has a great deal of value to its competitors. The asset is the customer. Could I be wrong? Well I have been many times before. If you read back to see my posts I think Pollyanna is not a description that fits me. I do not have a dime there and if I did I would be sending them written wire instructions today and calling them to confirm those instructions at 7:30 AM tomorrow. I would request they confirm my written instructions by email and then late in the day if the wire is not in I would be pushing hard for the Fed wire number associated with the wire they would be telling me they sent. I would immediately give that number to my bank and ask them to track it.

I would then in my last official act of my non-trading day (my time was eaten up by BS ... remember?) I would bang my head against the wall and then the dinning room table for being so stupid as to not have pulled the plug at the very first whiff of a problem.

I think if it goes belly up the transfer of accounts will be quick and smooth. Do I want to bet on it particularly when there is only downside to this bet? NEVER!!


Quote from FrankSlaughtery:

not to create arguments on a sat morning but here's my $0.02...

re "CME is all over them"...my trust in cme is shaken after the mf incident. i still trust that they would be financially able to act as a counterparty to every trade however my trust in their ability to run the back office as well is not so strong

re the accounts being switched overnight...for futures maybe but what about securities? as another poster said it still sucks to eventually get all of your money back but be without access to it in the meantime esp when it could be a few months

re being reassured by regulators...i almost spit up my red bull all over the screen. the regulators couldn't find their ass w/ two hands and a flashlight. enough said. it's up to us traders to take proactive steps to protect ourselves. the provider of gubmit cheese won't come riding over the nearest hill to save us.

i'll admit i'm extremely cynical when it comes to the gov and their ability to do anything right esp when it comes to trading and the instances where they have proving their incompetence are legion. there are many specific and actionable steps a trader can take to help mitigate risks in trading and et is a great source of sharing ideas. i for one never want to be 100% dependent on the sipc to pull me out of the fire.
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Quote from JamesL:

Hey jack, could you repeat yourself just one more time?
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Sorry, it looks like the system is delaying all my posts, so I was trying different things to see if the problem was on my end.

- Posted at 1/7/2012 10:23 am
 
The clearing firm is your broker. They are your counter party.


Quote from macintash:

If the broker is solid, would clients "loose money" if the clearing firm goes down?
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Supposedly Penson got supplemental insurance at LLoyd's:

https://www.zecco.com/explore/security.aspx

Zecco Trading's clearing firm, Penson financial Services, Inc., is a member of the Securities Investor Protection Corporation (SIPC).....Our clearing firm has purchased an additional insurance policy through a group of London Underwriters (with Lloyd's of London Syndicates as the Lead Underwriter) to supplement SIPC protection. This additional insurance policy becomes available to customers in the event that SIPC limits are exhausted and provides protection for securities and cash up to an aggregate of $600 million. This is provided to pay amounts in addition to those returned in a SIPC liquidation. This additional insurance policy is limited to a combined return to any customer from a Trustee, SIPC and London Underwriters of $150 million, including cash of up to $2 million.
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But how much in total client assets does Penson have? Will only $600 million cover it?
 
Per the quarterly statement dated 9/30/2011, the balance sheet currently lists 2.6 billion in cash and securities for segregated accounts per federal regulations. You can see the financials at Penson Worldwide (Penson.com). It is noted that TD Ameritrade/Think or Swim pulled out 2.5 billion in cash accounts during 2011, which I assume were segregated as well.
 
Why would anyone in their right mind hang around to find out if this covers it or not? Wire transfers are $25 or $30 -- what am I missing here?
 
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