Account risk

Discussion in 'Trading' started by NanoTick, Feb 13, 2009.

  1. My concern was about my margin account with Lightspeed trading. They do state on their website that all their customer funds are segregated. However, when I called them to confirm, the guy did not even seem to know what "segregated" means! So that didn't help ease my anxiety.
     
    #11     Feb 13, 2009
  2. Are you sure about this? When I talked Lightspeed they said even margin accounts are not commingled.
     
    #12     Feb 13, 2009
  3. chartman

    chartman

    When I talked Lightspeed they said even margin accounts are not commingled.
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    Margin accounts funds are "SUBJECT" to being commingled. It is up to the brokerage firm. But legally they can, and most do, use the free credit balance. Only in cash accounts "MUST" the customer's funds be segregated. Lighthouse do not carry customer's accounts (funds) but clear on a fully disclosed basis through Penson. They do not have actual procession of the funds.
     
    #13     Feb 13, 2009
  4. I read that margin account your stock can be loaned out even if you have no margin. So I got scared and told them to make my account cash.

    What would happen if your stock is loaned out to a short seller and the brokerage fails?
     
    #14     Feb 13, 2009
  5. When I wire my money to Penson, it goes to a JP Morgan Chase account. So after all my deposit is still commingled with JP Morgan's assets?
     
    #15     Feb 13, 2009
  6. I thought if your account is segregated then cannot loan your stocks to other customers. Can anyone confirm this?
     
    #16     Feb 13, 2009
  7. When you open a margin account you agree to the re hypothecation clause.

    Call your broker.
     
    #17     Feb 13, 2009
  8. tradersboredom

    tradersboredom Guest

    who cares most stock and brokerage accounts are too small to worry about they are insured under $100,000 stocks and cash.

     
    #18     Feb 13, 2009
  9. tradersboredom

    tradersboredom Guest

    sipc needs to increase insured of $2,000,000 cash and stocks. cause $1 million ain't a whole lot of money anymore.

     
    #19     Feb 13, 2009
  10. LeeD

    LeeD

    1. Are brokerage accounts at risk due to current financial crisis experienced by banks?
    - Yes, more than ever since equity ownership became comon and not the privildge of the very rich

    2. Where do brokerages keep our money? It it in another bank?
    - Yes, indeed. It's a good idea to check whith what banks they keep their deposits. Some banks such as HSBC or Societe Generale may be alright but others are in deep trouble.

    3. Is there risk from the clearing house?
    - The risk is purely operational risk. If teh clearing house collapses you won't get confirmations of teh recent deals. Though you don't profit from winning trades in the short term, the good news is you don't have any of your funds locked either. I would just ignore this risk from the credit prospective. However, accounting irregularities are no-no in clearing.

    4. Would you keep over a $100K at one brokerage?
    - If you have to split your capital between more than 2 brokerages in order to keep it under 100k you pretty much have to compromise this rule. Generally, brokerages who keep money with teh banks who received teh government bailout are in a better state
     
    #20     Feb 13, 2009