Is cash no longer fully insured in an IB account ?

Quote from Hoi:

Provided that he is a pure DayTrader (no holdings overnight), and trading 95% futures and seldom stocks or FX.
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If you trade 95% futures then you should keep your cash in the CFTC sub-account since:

(a) your funds from futures trading would not be eligible for SIPC coverage even though they are swept to the securities sub-account.

(b) not keeping the cash in the CFTC sub-account would mean that you are giving up preferential treatment of your claim in a bankruptcy.

Check out:

http://www.nfa.futures.org/nfamanual/NFAManual.aspx?RuleID=9059&Section=9

Specifically, the FCM should disclose that by transferring excess funds from an FCM's customer regulated commodity accounts, the customer will not receive the preferential treatment afforded funds held in a customer regulated commodity account pursuant to Part 190 of the CFTC's Regulations and the U.S. Bankruptcy Code.
 
Would it be possible for IB to set up a relationship with a bank so they could give you a choice of having your excess cash kept in an FDIC insured account rather than an SIPC account? TDA/thinkorswim does that, and it is a better choice for people who are solely futures traders.
 
Quote from opt789:

Would it be possible for IB to set up a relationship with a bank so they could give you a choice of having your excess cash kept in an FDIC insured account rather than an SIPC account? TDA/thinkorswim does that, and it is a better choice for people who are solely futures traders.
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You'd think.

One of the reasons I have moved most of my funds over to TD/TOS -- it sure isn't the commissions -- is this very issue and my perception that TD is strong financially.

IB seems stronger than ever financially but I don't understand some of their business practices.
 
Maybe I am being overly cautious, but after talking directly with SIPC and seeing what they have done in the Stanford and Madoff cases it is apparent to me that they are just another insurance company that will avoid paying if there is anyway they can get away with it. FDIC coverage is not that way at all.

From Bloomberg: “The SEC sued SIPC in December to compel coverage. Investors and their advocates in Congress say SIPC is deliberately taking a narrow view of the law to protect brokers from higher assessments.”
http://www.bloomberg.com/news/2012-...-investments-aren-t-eligible-for-payouts.html
 
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.
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Well, I don't think that your example applies to the legal hole in question here. In your case I'd just stuff my account with a T-Bill (a security to SIPC) and sweeps excess cash into SIPC account. That way you'd have both the higher SIPC insurance limit of 500k, the 100k of cash and there's no way SIPC could argue anything.
For other guys like pure futures trades, specially ones that trades foreign futures, then yes that is a hard question to answer.
 
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 opt789:

Would it be possible for IB to set up a relationship with a bank so they could give you a choice of having your excess cash kept in an FDIC insured account rather than an SIPC account? TDA/thinkorswim does that, and it is a better choice for people who are solely futures traders.
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You would not be covered for broker fraud in that case.

FDIC only covers you for bank fraud, not broker fraud.
 
Quote from velosoandre:

Well, I don't think that your example applies to the legal hole in question here. In your case I'd just stuff my account with a T-Bill (a security to SIPC) and sweeps excess cash into SIPC account. That way you'd have both the higher SIPC insurance limit of 500k, the 100k of cash and there's no way SIPC could argue anything.
For other guys like pure futures trades, specially ones that trades foreign futures, then yes that is a hard question to answer.
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For T-Bills to be used for margin, IB requires that a million dollars be invested.

Also I believe in the MF Global case they decided that t-bills held by futures customers would not be paid out in full under SIPC insurance coverage but rather treated the same as cash (.i.e. only 75% paid out).

It might still work but I am just pointing out potential pitfalls to consider.
 
I'm over it, options12 is just a shill trying to stir up trouble

notice how the thread title includes IB?

why not talk about any firm?

40 pages of bullshit with no other purpose than to get dumbass people like me to switch brokers
 
Quote from oldtime:

I'm over it, options12 is just a shill trying to stir up trouble

notice how the thread title includes IB?

why not talk about any firm?

40 pages of bullshit with no other purpose than to get dumbass people like me to switch brokers
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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?
 
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