This cap on Lloyd's potential liability would mean (that in the unlikely event this insurance would be triggered) there would be a proration if Lloyd's liability exceeded $150 m in aggregate. Interactive's capital is currently substantial. I believe the old insurance didn't have an aggregate cap. Fixed amount per account.
I'll find out more tomorrow but what I know for now. Travellers is leaving the insurance business for brokers - most firms used them and will now have a difficult time getting additional insurance. Because most accounts maintain less than $500,000 in net equity, SIPC protection would cover the large majority of customer assets held by IB. In the extremely unlikely event of a total loss of customer assets, the supplementary protection would be needed to cover a relatively small portion of the total net customer equity held by IB. Although possible, it is improbable that the aggregate loss limit would be reached. However, if the supplementary protection fell short of covering all customer assets, the coverage would be allocated on a pro rata basis to the client accounts that required protection. Keep in mind if you have a large account and own shares, you'd still own your shares. also, IBG has over 1.5 in equity capital and is in extremely good financial health. We are one of the rare private brokerages that post our financials on our web site and we have a very strict margining policy (i.e. we require money/margin up front and liquidate accounts as opposed to making margin calls). Some say this is the greatest insurance of all. answer to other question: we sweep excess cash from futures accounts into the securities accounts at the end of each trading day. just a heads up for those who may comment on my comments: I'm logging out after this post so if you have further questions, I won't see them till tomorrow.
def, Thanks for the response, it is the cash limit in particular that I am concerned about. While I am often using margin, there are times when I have cash in my account that would not be covered by sipc. I believed I was protected with the old insurance, but this new policy seems to leave a certain amount of risk that must be considered. I would be much more comfortable if I new exactly how much of my cash was insured. Thanks again for the help.
I have always thought that Lloyd's of London has insured so much that all it would take is for Michael Jackson's nose to fall off to put Lloyd's over the edge... am I wrong?... Another thing: Has Travelers gotten word the terrorist's are about to strike and bring the market to it's knees?
Per IB "Only the securities portion of a Universal Account is protected. Each evening, IB's margining system seeks to transfer as much cash as possible to the securities portion of the Universal Account". What I read out of IB's statements is if for any reason IB does not transfer your cash to the Universal Account and as a result you have a loss, IB is not responsible for your loss. I would think in a time of crises for IB, it could well be that no ones cash would get transferred to the Universal Account.
I do not know of any firm that has insurance for a futures account. Thus if trading futures you should do your homework and be comfortable with the financial situation with both your broker and most importantly its clearing firm. eldridge, from what I read it is 1 million is cash between SIPC and the supplemental insurance.
I've known that the SIPC doesn't insure futures, but I've never scruitinized the fact that brokers offer zero protection to futures accounts. I'm not surprised, I just never gave it substantial consideration until this interesting confluence of events (futures margin raised on the exchanges, travellers leaving the brokers, sober new IB notification). If one trades only futures, is there any good reason not to relocate the ~75% of an account that's not employed as margin? At least in retail savings accounts it's covered by the FDIC which is several layers safer than a naked futures account even if it is with a top notch broker, imo.