Using Treasuries As Deposits In Trading Accounts

T

The Bishop

Depositing treasury securities into your account instead of cash to use as collateral for trading.

Could someone explain (Treasuries as Trading Collateral for Dummies) how this works in the real world? Without any SIPC coverage in futures accounts, I am looking to protect what I have on deposit.

Are the treasuries held in my name or street name? How much trading collateral is allocated for these deposits ( 75% 85%? 90%) and what type of margin interest does a firm charge? In the event of another MFG or PFG, does thios protect the client or are they still labeled general creditor and have to get in line with the rest?

Thanks. Any insight provided would be appreciated.
 
An interactive brokers universal account is both a securities and futures account and you can set it up to sweep money to the securities account that is sipc insured. You can also be long stocks or bonds in the securites account and use this as security for a margin loan to trade futures or options on futures.
 
There have been numerous questions as to whether this works for those with primarily futures trades. Not sure if anyone really knows how this will be handled by SPIC in all circumstances.

Not trying to pretend I know the answers here or looking for a debate. Just noting this may not be as pat a hand as it seems.

Quote from just21:

An interactive brokers universal account is both a securities and futures account and you can set it up to sweep money to the securities account that is sipc insured. You can also be long stocks or bonds in the securites account and use this as security for a margin loan to trade futures or options on futures.
More...
 
Quote from just21:

An interactive brokers universal account is both a securities and futures account...
More...

... i.e. one account used for 2 purposes...


Quote from just21:

... and you can set it up to sweep money to the securities account that is sipc insured. ...[/B]
More...

... so it is NOT ONE account? I don't understand how this works, if it is ONE account...

Can you explain in more detail?
 
Quote from just21:

An interactive brokers universal account is both a securities and futures account and you can set it up to sweep money to the securities account that is sipc insured. You can also be long stocks or bonds in the securites account and use this as security for a margin loan to trade futures or options on futures.
More...

Already have an IB account.

This question is in reference to a futures only account which does not have SIPC coverage.
 
Quote from karoshiman:

... i.e. one account used for 2 purposes...


... so it is NOT ONE account? I don't understand how this works, if it is ONE account...

Can you explain in more detail?
More...

It is NOT one account on IB's own books.

By law, all brokers must maintain separate futures and stock accounts. Each is subject to completely different regulatory regimes under two different regulators and there is no way that they could ever by combined.

They have to report balances to the different regulators etc.


EXCEPT that IB has set up a "virtual" combined account for users convenience which is just a convenience reporting layer for clients. Underneath the covers, they bookkeep transfers between the underlying different real accounts as needed.

Swan is correct that when people contacted SIPC, they indicated that shams such as transfers of idle futures balances to securities accounts would NOT necessarily be honored for insurance purposes.

TBills in a futures account will not do any good either. Ask the people in PFG or MFG how well that worked for them. The Trustees just sold them off at market and took the same haircuts off their value as for cash, even though people argued they were "securities".

Anyway IB has a one million dollar minimum to use T-Bills for margin.
 
Quote from comintel:

It is NOT one account on IB's own books.

By law, all brokers must maintain separate futures and stock accounts. Each is subject to completely different regulatory regimes under two different regulators and there is no way that they could ever by combined.

They have to report balances to the different regulators etc.


EXCEPT that IB has set up a "virtual" combined account for users convenience which is just a convenience reporting layer for clients. Underneath the covers, they bookkeep transfers between the underlying different real accounts as needed.

Swan is correct that when people contacted SIPC, they indicated that shams such as transfers of idle futures balances to securities accounts would NOT necessarily be honored for insurance purposes.

TBills in a futures account will not do any good either. Ask the people in PFG or MFG how well that worked for them. The Trustees just sold them off at market and took the same haircuts off their value as for cash, even though people argued they were "securities".

Anyway IB has a one million dollar minimum to use T-Bills for margin.
More...

Thank you! Good to know...
 
one more thing...given the above it's really only good to use them when rates are high and you can earn a significant amount of interest. for ex, $1 million USD earns $50k a year w/ rates at 5%. given the current and projected outlook by the fed, i think it'll be 2145 before we see rates that high again.
 
You must log in or register to reply here.
Back
Top