What is the risk of losing my money with a futures broker ?
- Thread starter puretruth
- Start date
No.
SIPC covers "securities".
Futures aren't "securities".
See http://www.sipc.org/how/brochure.cfm#three
Investments protected by SIPC. The cash and securities â such as stocks and bonds â held by a customer at a financially troubled brokerage firm are protected by SIPC. Among the investments that are ineligible for SIPC protection are commodity futures contracts and currency, as well investment contracts (such as limited partnerships) that are not registered with the U.S. Securities and Exchange Commission under the Securities Act of 1933.
I agree that there is still no name of a futures broker and that is encouraging. That said these are uninsured accounts that depend on THE FIRM segregating customer funds from their own and additionally policing their customers in a way that insures that one or more larger customers does not deplete that segregated pool of money due to market losses.
Yes ... other customers loses can sink the segregated funds and you!
The reason other customers loses can have a bearing on both your liquidity and ultimate recovery is that the segregation rules -- as I understand them -- call for segregating customer funds from the firm's funds but NOT segregating customer A's funds from customer B's.
When you add the fact that there are NFA members that do not use a larger and better capitalized clearing member to hold and enhance the safety of your funds and that those members are often not CME members or members of any other major exchange you have the following: Firms that are required to segregate but could comit fraud or be lax with a major client whose business they need and giving them overnight to get more margin money in before liquidating positions.
Yes ... it seems the perfect storm has not happened but there are holes in the fabric that are potentially dangerous. And one more thing. The segregation rules go out the window for trades on foreign exchanges and, of course, Forex and other non- securities OTC trades.
For smaller accounts one securities broker is ABOUT as safe as another because of SIPC. That is simply not true in futures' markets.
Yes ... other customers loses can sink the segregated funds and you!
The reason other customers loses can have a bearing on both your liquidity and ultimate recovery is that the segregation rules -- as I understand them -- call for segregating customer funds from the firm's funds but NOT segregating customer A's funds from customer B's.
When you add the fact that there are NFA members that do not use a larger and better capitalized clearing member to hold and enhance the safety of your funds and that those members are often not CME members or members of any other major exchange you have the following: Firms that are required to segregate but could comit fraud or be lax with a major client whose business they need and giving them overnight to get more margin money in before liquidating positions.
Yes ... it seems the perfect storm has not happened but there are holes in the fabric that are potentially dangerous. And one more thing. The segregation rules go out the window for trades on foreign exchanges and, of course, Forex and other non- securities OTC trades.
For smaller accounts one securities broker is ABOUT as safe as another because of SIPC. That is simply not true in futures' markets.