Is cash no longer fully insured in an IB account ?

[Hoi]

Quote from comintel:

For T-Bills to be used for margin, IB requires that a million dollars be invested.

That's not an option anyway, as the trader in my original question wants to be a pure-daytrader (no position what so ever during overnight or weekends). He wants to be 100% cash...

But where to sweep his cash, if he only trades Futures during RTH ?

 

[Nick29]

Quote from Hoi:

What should the following trader chose best?

A) sweep excess funds into Security account (SEC, SIPC rules)
B) sweep excess funds into Commodities account (CFTC rules)

Provided that he is a pure DayTrader (no holdings overnight), and trading 95% futures and seldom stocks or FX.

Reading the whole thread I become more and more inclined to select choice-B…..

Playing devil’s advocate: Say IB runs into the same problems as MF-Global, and needs cash to postpone/avoid bankruptcy. Then IB has two cash-pools: one of clients with non-segregated Securities accounts, and the other “pure”-segregated Commodities accounts. Would it then be much easier for IB to “lend” the money from the Security-account-pool? Especially as those accounts are assured by SIPC, and will not hurt the clients?



I really like to know what the above trader should select best: A or B.

Securities accounts are segregated as well are they not?
From IB's site:

" Current SEC regulations require broker-dealers to perform a detailed reconciliation of customer money and securities (known as the “reserve computation”) at least weekly to ensure that customer monies are properly <b>segregated</b> from the broker-dealer’s own funds.

In order to further enhance our protection of our customers’ assets, Interactive Brokers recently sought and received approval from FINRA (the Financial Industry Regulatory Authority), to perform and report the reserve computation on a daily basis, instead of once per week. IB initiated daily computations in December 2011, along with daily adjustments of the money set aside in safekeeping for our customers. Reconciling our accounts and customer reserves daily instead of weekly is just another way that Interactive Brokers seeks to provide state-of-the-art protection for our customers.

Customer-owned, fully-paid securities are protected in accounts at depositories and custodians that are specifically identified for the exclusive benefit of customers. IB reconciles positions in securities owned by customers daily to ensure that these securities have been received at the depositories and custodians."

 

[atrocious]

Quote from comintel:

For T-Bills to be used for margin, IB requires that a million dollars be invested.

I'm pretty certain that's no longer the case since IB enabled trading of T-Bills on the secondary market.

The catch with IB is - unlike traditional FCM's which let you use the T-Bill itself as commodities collateral, IB forces you to borrow against the T-Bills in the securities account (paying a margin loan) in order to move cash into the commodities account.

 

[oldtime]

Quote from comintel:

Well he has accomplished a lot in any case - getting IB to withdraw their assertion of SIPC coverage for cash for forex and futures.

What firm is he working for?

I don't know, but he showed his cards on another thread

like I said, good conversation and informative

but run by a shill

 

[Hoi]

Quote from Nick29:

Securities accounts are segregated as well are they not?

Well, I'm not sure... as on the page in Account-management, where you get the option to chose your Sweep-methode, the following text is printed:

Whether you have assets in an IB securities account or in an IB futures account, your assets are protected by U.S. federal regulations governing how brokers like IB must protect your property and funds. In the IB securities account, your assets are protected by SEC and SIPC rules. In the IB futures account, your assets are protected by CFTC rules requiring segregation of customer funds.

You can interpret this, as if the benefit of selecting CFTC is "segregation" as opposit to the other option.

 

[Nick29]

Quote from Hoi:

Well, I'm not sure... as on the page in Account-management, where you get the option to chose your Sweep-methode, the following text is printed:


You can interpret this, as if the benefit of selecting CFTC is "segregation" as opposit to the other option.

This quote from IB's strength & security section seems just as valid though:

"Current SEC regulations require broker-dealers to perform a detailed reconciliation of customer money and securities (known as the “reserve computation”) at least weekly to ensure that customer monies are properly <b>segregated</b> from the broker-dealer’s own funds."

Can someone from IB reading this clarify please?

 

[comintel]

Quote from Nick29:

Securities accounts are segregated as well are they not?

IB is just quoting the boilerplate from the two different agencies, as they are required to do by each agency.

As far as the CFTC is concerned, you lose the benefit of its segregation requirements if you move cash to a securities account. Maybe it is segregated there as well, under a different agency's rules, but the CFTC does not know or care about that.

Actually, segregation of commodities account funds is better than segregation under SEC rules, because the SEC allows hypothecation and re-hypothecation of those funds to a much larger extent than the CFTC does.

 

[opt789]

Quote from comintel:

You would not be covered for broker fraud in that case.

FDIC only covers you for bank fraud, not broker fraud.

If the FDIC member bank allows a broker to steal money from your FDIC covered account, I think that would be considered bank fraud. But since a case like that has never happened, I am not sure we know what will occur.

 

[comintel]

Quote from opt789:

If the FDIC member bank allows a broker to steal money from your FDIC covered account, I think that would be considered bank fraud. But since a case like that has never happened, I am not sure we know what will occur.

Agreed.

It might depend on the wording of the account agreement.

For example, the agreement might explicitly exonerate the bank for any liability for withdrawals made in your name for any reason.

 

[Options12]

Quote from oldtime:

well, it was an interesting and fun conversation and topic until I finally figured out that options12 is a shill for another firm. I must admit, he did a good job of keeping this thread alive. And I will be the first to admit he got me.

Screw me once, shame on me

Quote from oldtime:

notice how the thread title includes IB?

why not talk about any firm?

These are false statements. I don't work for anyone and did not start this thread.