SIPC How secure is your broker ?

G

guy990opl

sorry to ask the obvious but I just want to double check on the broker insurance. Most claim to be SIPC insured, but what if someone has more than $ 500.000 in cash what would happen if the boker goes belly up ?

( Etrade / etfc ) does not look pretty in 2008.

It might be an unlikely scenario, but after the collapse of Bear Stearn I would like to know if other traders are comfortable in keeping a large sum of money with their broker.


Thank You
 
All broker-dealers have to belong to SIPC.

Only $100,000 in cash is covered by SIPC.

Use a well capitalized broker that doesn't have risky customers.
 
Nowdays things can get crazy so before thinking about all the money I could make by trading I think about keeping safe what I have. It seems that the vast majority of brokers if they go bankrupt will cover your cash up to $ 200.000

At this point I wonder if FDIC insurance is additional to the SPIC insurance, if that is the case, any normal broker with the basic insurances should cover your account up to $ 200.000 in cash

...$ 100.000/FDIC + $ 100.000/SPIC, right ?


About my broker,

I called ETRADE they give me two options.

1) Just like you said FDIC up to $ 100.000 cash and a nice interest on the cash sitting in your account in my case 2.5%


2) Very little interest for the cash sitting in the account 0.3% and FDIC insurance up to $ 500.000 with their ESDA account feature.

esda stands for extended insurance sweep deposit account and from their website:

" Product Description
ESDA is a bank deposit account at our affiliate, E*TRADE Bank and additional deposit accounts at up to four other banks. This allows FDIC insurance coverage up to $500,000. It is not a money market fund. "

Your uninvested cash will go back and forth between your account and the banks they work with.

Basically they will give a higher FDIC cash coverage as long as they can use/borrow your cash for peanuts. I am not complaning but generally speaking it is obvious that banks are not your friend, ever.
 
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