Is IB safe enough to use as a bank for > 500,000 USD?

Negative: share price down to 52-week low of $13.00 on 8 August, and very close to the 6 March 2009 low of $12.68.

Positive: IBKR is paying a 10 cent quarterly dividend
(yield of 2.8% using share price of $14.26 and annual dividend of 40 cents).

Positive: I believe (not 100% sure) that Thomas Peterffy still owns 90% of IBKR:
http://investors.interactivebrokers.com/en/general/about/aboutIR.php?ib_entity=ir

Link to S&P rating:
http://individuals.interactivebrokers.com/en/general/about/ratingSandP.php
 
I think discussing the credit rating of IB is not the issue here. The main point is whether trader's/clients fund are 100% insured in case IB goes bankrupt/out of business (for whatever reason).
 
Quote from def:

Your memory doesn't serve - IB LLC is rated A-/A-2 by S&P.

What is safe and what facts do you need for support?

Is safe 100% guaranteed - then no.

However if safe is defined and support is evidenced by a firm that has little if no debt, billions in shareholder capital, a history of steady profits, a conservative risk management policy, additional insurance and a track record of over 30 years, and most importantly, a conservative investment policy, then yes, I would say IB is safe and in a better financial position than most - if not all - firms in this industry.
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I do not think discussing the credit rating (or stock price) of IB pertinent to this thread's question. The main point is whether trader's/clients fund are 100% insured in case IB goes bankrupt/out of business (for whatever reason).
 
Easy solution.

Monitor the IBKR quarter reports.

As long as they make a profit, everything is healthy and safe.

The moment you see something that strikes as very wrong, losses, accounting fraud, you know the type, transfer the balances out until they return to profitability and/or the fraud issues are cleared.

Crazy A
 
Quote from Daal:

IB is a BBB rated company(If memory serves), the idea that uninsured money is safe there is simply not supported by the facts
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Credit ratings aren't a measure is safety, 2008 should have made that pretty clear. Still, I agree that a broker is inherently not a really safe place to keep money, that is obvious. All it takes is one failure of risk controls, or a huge market crash, and you're toast.
 
Quote from Ghost of Cutten:

Credit ratings aren't a measure is safety, 2008 should have made that pretty clear. Still, I agree that a broker is inherently not a really safe place to keep money, that is obvious. All it takes is one failure of risk controls, or a huge market crash, and you're toast.
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I think the risk controls of IB are pretty damn solid.

Haven't you seen the number of people here in ET continuously bitching due to margin liquidation ? They are quite strict in the regard.

Besides, what is safer, bonds and savings account losing continuous value due to inflation? All protected by the broke FDIC ? hah

FoN
 
To the OP:

No broker is a safe place to keep money. All brokers are inherently risky. History is littered with the corpses of failed brokerage firms.

No bank is a safe place to keep money beyond the insured limit. Banks are highly leveraged institutions vulnerable to runs, history is littered with their corpses. Deposit insurance only goes so far, and by definition the government cannot insure all deposits, since deposits outweigh government funding ability.

The only relatively safe places I keep money are as follows:

T-bills of solvent, politically safe sovereign states
Mutual funds or ETF structures that invest in such t-bills

Another pretty safe place, in some ways safer than t-bills (although more volatile) is a diversified portfolio of deposit-insured cash, t-bills, long-term government bonds, blue-chip stock indices, and gold (part physical, part ETF). This portfolio will vastly outperform cash in the event of sovereign default or collapse, and the exchange-traded elements (most of it) can be liquidated and converted to cash in hand within a day or two.
 
Quote from FreakofNature:

I think the risk controls of IB are pretty damn solid.

Haven't you seen the number of people here in ET continuously bitching due to margin liquidation ? They are quite strict in the regard.

Besides, what is safer, bonds and savings account losing continuous value due to inflation? All protected by the broke FDIC ? hah

FoN
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Solid risk controls can still fail. The brokerage business is inherently risky, due to the employment of leverage, and regular trading in leveraged instruments. IB is probably the safest independently-owned broker on the planet, but that is like being the safest motorbike on the road. I keep a healthy amount of my net worth at IB, but not so much that I'd be impoverished if it went bust overnight.

Losing 1-2% per annum purchasing power for a few years is not risky in the way that losing 100% of your savings overnight is. You can easily hedge by owning some TIPS, gold, and so on.
 
My point is, if even a rating agency is seeing risk there(to the point of rating the broker A-), obviously there is risk there(No matter what they say), because if anything its likely the rating is too high
 
Quote from Ghost of Cutten:


Another pretty safe place, in some ways safer than t-bills (although more volatile) is a diversified portfolio of deposit-insured cash, t-bills, long-term government bonds, blue-chip stock indices, and gold (part physical, part ETF).
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Ya but you kind of need a broker to own the blue chip ETFs....

Or are you saying the risk lies if the cash is not invested in the brokerage account?

FoN
 
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