Yet Another IB SIPC Sweep Question ...

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Quote from velosoandre:

As much as MF Global situation erases people's trust, your SIPC fear in this case is entirely unfounded.

I encourage you to contact SIPC by phone or e-mail via asksipc@sipc.org to check Interactive Brokers' statement on SIPC coverage of forex and of cash swept from commodities sub-accounts.

In the meantime, please read this statement from SIPC which has been posted elsewhere on ET.

See page 4 of this comment letter:

http://www.sec.gov/comments/s7-08-07/s70807-16.pdf

"Under SIPA, a customer's claim for "cash" derives from a few sources. One, the "cash" arises from the broker's sale of securities for the account of the customer. Two, the "cash" has been deposited by the customer with the broker for the purpose of purchasing securities. Three, the cash consists of dividends or other return generated on securities held by the broker for the customer. 15 U.S.C. $78lJ(2). Key is the fact that the cash owed by the broker to the customer is on deposit in connection with the purchase or sale of a "security," as defined in SPA. The facile labelling of an asset as "cash"does not transform it into a protected asset if unrelated to the purchase or sale of a "security."

-and-

"By the same token, the close-out of futures contracts and the valuing of options on futures contracts does not yield cash resulting from the purchase or sale of a "security." Margin deposited to secure a futures position is not cash on deposit in connection with a "security" trade."

From this thread: http://www.elitetrader.com/vb/showthread.php?s=&threadid=234850&perpage=6&pagenumber=3

 

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Quote from velosoandre:

In fact, SIPC also covers commodity futures if you trade it in a portfolio margin account - that's what they say.

velosandre, IB-AN addressed the portfolio margin issue with respect to SIPC coverage in another thread (see below).

But again, if you want to be sure, double-check IB's statements on SIPC coverage directly with SIPC via their "asksipc" feature on www.sipc.org.

http://www.elitetrader.com/vb/showthread.php?s=&postid=3404828#post3404828

"No futures or futures option contract is currently allowed to be carried in a securities account portfolio margining or otherwise (with the exception of a single stock future which is a jointly regulated product, eligible to be carried in either a futures or commodities account). This is why there is no cross-margining, for example, between a CME S&P 500 futures contract and an CBOE S&P 500 securities option or a SPY ETF despite the logical economic relationships. In order for this to happen, rule changes would need to take place at each of the CFTC, SEC and SIPC.

You should also note that a marked-to-the market futures contract is a contingent liability, not an asset warranting protection. Thus its inclusion in a portfolio margin securities account is, in part, a margin matter but also a matter of aggregate exposure as a regulator or insurer might not necessarily take the view that the volume of hedging activity between securities and futures warrants wholesale inclusion of futures into the portfolio margin account.
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Interactive Brokers"