Why Interactive Brokers Founder Fears Bitcoin Futures

Maverick74 said:
Correct. This is very similar to holding stock securities. Most people who have retail trading accounts sign away this right to have a margin account. This means when you buy shares of AAPL, your broker is probably lending your shares to someone else since you chose not to hold the securities in your name but in "street name". The benefit to you is you get immediate access to margin vs waiting for the clearing process. The same is true in the futures market. Except we are not dealing with securities usually. US Treasuries are a security and like stocks, you can buy them and hold them in your name.

In the old days a big reason people did this is because in the 1980's, they paid 15% a year! This was how many FCMs made money back then. They took your cash and bought Treasuries, Pocketed the interest and lent you the money to trade. If you guys recall this is how PFG got in trouble. Except they didn't buy Treasuries, they bought higher risk securities. When those blew up, the customers were shocked. They shouldn't have been as all FCMs put this in their trade agreements which you sign. Which means it's even more important for you to take control of your funds.
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Just out of curiosity since I haven't done this, what's the delay on each side when you use this method? i.e. if you want to put a trade in using your money that's in the Treasury, how long of a delay between you asking to liquidate the treasury and the FCM being able to place the trade?
 
Sig said:
Just out of curiosity since I haven't done this, what's the delay on each side when you use this method? i.e. if you want to put a trade in using your money that's in the Treasury, how long of a delay between you asking to liquidate the treasury and the FCM being able to place the trade?
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They don't make the trade. You buy the treasuries directly from the Govt (very easy to do online) and then transfer the treasury into your FCM. So instead of depositing cash at your broker, you transfer your treasury holdings. It's possible some of the bigger brokers have the ability to buy the Treasuries for you but I wouldn't do that.
 
Maverick74 said:
It's possible some of the bigger brokers have the ability to buy the Treasuries for you but I wouldn't do that.
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Just curious as to why you wouldn't do that?

I hold a 6mo treasury at RJO used as margin and they roll it for me every 6 months at auction. They assure me it's being held under my name in a firm account but i guess there is no way for me to really know.
 
rallymode said:
Just curious as to why you wouldn't do that?

I hold a 6mo treasury at RJO used as margin and they roll it for me every 6 months at auction. They assure me it's being held under my name in a firm account but i guess there is no way for me to really know.
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I just think in general all things being equal, it's better to be in control of these things then letting someone do it for us. I don't believe it's an issue of RJO doing anything nefarious. I just think in general the financial industry makes certain things easy for you to hand over control of some process. You can get the cusip number from them so you know it's there but what you are doing is fine.
 
Maverick74 said:
I just think in general all things being equal, it's better to be in control of these things then letting someone do it for us. I don't believe it's an issue of RJO doing anything nefarious. I just think in general the financial industry makes certain things easy for you to hand over control of some process. You can get the cusip number from them so you know it's there but what you are doing is fine.
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So at retail level what is the procedure? and what would be min size? and is this doable for non US residents?
 
Peterfy gave another interview on it today. So basically they will not allow shorting of the futures and the margin will be 50% for the longs. Bottom line, this thing is DOA at least for now. If brokers aren't going to allow shorting there won't be a two sided market. And since many other brokers are waiting for liquidity before they let their clients jump in this might be the biggest nothing burger of all time.
 
The bulge-bracket firms won't be Day-1 participants. (I touched base with four of them today). Only the 2d/3d tier FCMs will be.
 
Maverick74 said:
Peterfy gave another interview on it today. So basically they will not allow shorting of the futures and the margin will be 50% for the longs. Bottom line, this thing is DOA at least for now. If brokers aren't going to allow shorting there won't be a two sided market. And since many other brokers are waiting for liquidity before they let their clients jump in this might be the biggest nothing burger of all time.
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I think he also said that they will charge $5/side.
 
This is from the FIA (Futures Industry Association) open letter:

"As the principal members of derivatives clearinghouses worldwide, FIA's 64 clearing members play a critical role in the reduction of systemic risk by

(1) guaranteeing their customers’ trades,
(2) contributing to the guarantee funds of clearinghouses and
(3) committing to assessment obligations during clearinghouse shortfalls."

https://fia.org/articles/open-lette...-regarding-listing-cryptocurrency-derivatives

(I added the numbers for clarity)

--> Does anyone know the maximum possible loss that IB would suffer from (2) and (3) for both CME and CBOE?
 
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