Is cash no longer fully insured in an IB account ?

Reading this thread, it seems that it is better to sweep funds for securities traders and not to sweep for big commodities traders, but what would you do with a 100 K$ IB account where you only trade commodities?

Would you sweep to possibly benefit from SIPC coverage( in case they don't go in details of your trading )or keep it in the commodities account where there should theoretically be a chinese wall between your funds and those of the firm( You never know, IB may be honest about segregation unlike MF... )?

Thanks.
 
Stupid question since my account is with IB UK. Does someone know what is the best with a 100 K$ account at IB UK where you only trade US commodities?

Thanks a lot.
 
So with the new development, I guess I am still uncertain whether the SPIC would cover the insurance for cash swept from the sale of futures contracts over into the 'equities area.' So, I'm going to assume the worst for now and continue with my plan to not co-mingle equities and futures in one IB account (requires some account movement IMO) and also, for any funds that I do keep at IB for futures trading, the bare minimum in the account. More comfortable with an equities only trading account at IB - can't beat that $1 commission if you want to scale in slowly on weakness to index ETF's.

TOS (TD Ameritrade) sweeps cash from futures sales over to an FDIC insured bank account(s), my preference. Their commissions are a bit higher but not so much of a factor with the way I trade futures, which is to not scalp them. Velocity supposedly does this also, to BofA.
 
Quote from heywally:

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TOS (TD Ameritrade) sweeps cash from futures sales over to an FDIC insured bank account(s), my preference. Their commissions are a bit higher but not so much of a factor with the way I trade futures, which is to not scalp them. Velocity supposedly does this also, to BofA.
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This sounds very nice but I think I can make a case that SIPC insurance may be a better option that FDIC insurance in this context.

Here it is.

Let's say your broker is not actually keeping your money in your account (despite sending false statements that appear to show all is a-ok) but is instead using it to buy foreign sovereign junk bonds. Unfortunately these are defaulted upon and everything falls apart.
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Now, are you covered under SIPC if the funds are in a securities account? Yes, because SIPC insures against fraud by your broker.

Are you covered under FDIC? I think not, if the funds did not actually make it to the bank, if the broker did not actually put them there. If you have statements directly from the bank saying the funds are there, I guess you are ok. But if the statement is just from your broker, not from the bank, I am not sure that the bank or FDIC would be bound by that if it is inaccurate.

Now TD Ameritrade is owned by TD Bank of Canada, and so is TD Bank USA, but they are not all the same legal entity. Actually I would not be concerned at all in the case of TD anyway, but other cases might not be such a sure thing.

Of course, you might have coverage by both SIPC and FDIC at the same time. But if the funds were supposed to be swept right from a commodity account into an FDIC account, then you would not have SIPC coverage.

This example may be a little contrived, but my basic point is that the SIPC directly guarantees your account with the broker, whereas the FDIC only guarantees however much of it actually makes it to the bank under direction from the broker.

If we hypothesize another chaotic broker meltdown culminating in sudden bankruptcy, with allegations of fraud, and the books in a shambles, would you be 100% confident that the broker had dutifully remitted 100% of your cash to the separate individually-segregated FDIC-insured bank accounts right up to the last moment? Or is it more likely that those bank accounts would end up with deficiencies also?

I believe that the FDIC would only cover problems within the bank proper, not failure by your broker to deposit money to the bank.
 
Quote from TraDaToR:

Stupid question since my account is with IB UK. Does someone know what is the best with a 100 K$ account at IB UK where you only trade US commodities?

Thanks a lot.
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It looks as if you in the UK do not have the sweep option:

http://www.interactivebrokers.com/en/accounts/releaseNotes/acctMgmtNotes_january2012.php

"This feature applies to all IB entities EXCEPT IB-India and IB-UKL."

This is probably because you are under a separate regulatory and protection scheme defined by the UK.

Also

http://www.interactivebrokers.com/e...sersguide/accountadmin/excess_funds_sweep.htm

"This feature is not available in IB-India and IB-UKL accounts."
 
Quote from comintel:

This sounds very nice but I think I can make a case that SIPC insurance may be a better option that FDIC insurance in this context.

Here it is.

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Thanks ... not sure I'm willing to take my paranoia to that level, especially with TD and their banks but I'll look into it.

Then there is the question of whether the SPIC would agree to cover the insurance of funds that were 'derived' from futures sales, in an IB failure or overall domino meltdown. And I guess in a big meltdown, the G would have to step in and bail out the SPIC.

I guess my theory based on what little I know, is that it is better to be insured by the gubment than a private entity like SPIC when it comes to cash distributions from futures.
 
Quote from comintel:

Now, are you covered under SIPC if the funds are in a securities account? Yes, because SIPC insures against fraud by your broker.
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Remember that the debate here is whether or not funds are covered by the SIPC just because the funds are parked in the securities account.

Not all cash is eligible for coverage.

This debate might also extend to whether or not foreign currency cash held in a securities account is covered if such foreign currency is simply the product of a forex trade and not used for the purchase of securities denominated in foreign currency.

IB states that the foreign currency positions traded by its customers are covered. However, this seems to conflict with other published information on what is and isn't covered by SIPC.

It's worth checking into further.

Read more here: http://www.elitetrader.com/vb/showthread.php?s=&threadid=232473&perpage=6&pagenumber=6
 
Quote from comintel:

It looks as if you in the UK do not have the sweep option:

http://www.interactivebrokers.com/en/accounts/releaseNotes/acctMgmtNotes_january2012.php

"This feature applies to all IB entities EXCEPT IB-India and IB-UKL."

This is probably because you are under a separate regulatory and protection scheme defined by the UK.

Also

http://www.interactivebrokers.com/e...sersguide/accountadmin/excess_funds_sweep.htm

"This feature is not available in IB-India and IB-UKL accounts."
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IB-UKL accounts are a specific subset of IB-UK accounts which hold physical metals (spot gold & silver) and CFDs. These particular OTC products are not regulated by the CFTC or SEC and are therefore not carried with IB-LLC, the US broker dealer and FCM. They are not afforded SIPC protected as noted on the website.

In contrast, the securities positions of IB-UK clients are cleared and carried on the books of IB-LLC, It is through this arrangement that these accounts are afforded SIPC protection for their securities positions
 
Quote from Options12:

Remember that the debate here is whether or not funds are covered by the SIPC just because the funds are parked in the securities account.
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Well I do not know if we can narrowly restrict the discussion to the exact question raised in the original title. I think that might reasonably be extended to a comparison with alternative forms of insurance available such as FDIC at other brokers, since that was raised by someone here.

I do have to agree that really it would be better in another thread. Maybe someone can start one if they want to pursue it further.

As to foreign cash, yes that is a bit of a mystery. Since IB states unequivocally that it is covered under SIPC, I think that one could possibly sue them if one relied on that and suffered a loss. Also if the SIPC, of which IB is a member, lets the assertion go unchallenged for years by IB that it is covered, despite undoubtedly being aware of the claim being made by its member, I think they might not be allowed by a court to take an opposite stand after the fact under the doctrine of estoppel.
 
Quote from IB-AN:

IB-UKL accounts are a specific subset of IB-UK accounts which hold physical metals (spot gold & silver) and CFDs. These particular OTC products are not regulated by the CFTC or SEC and are therefore not carried with IB-LLC, the US broker dealer and FCM. They are not afforded SIPC protected as noted on the website.

In contrast, the securities positions of IB-UK clients are cleared and carried on the books of IB-LLC, It is through this arrangement that these accounts are afforded SIPC protection for their securities positions
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Great - thanks for the clarification!

I should have looked up the meaning of IB-UKL and not assume that it referred to all IB-UK accounts.
 
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