Are future accounts safe at BAC?

Discussion in 'Retail Brokers' started by quintrix, Feb 24, 2009.

  1. If you open an account with RCG outside USA , your segregateD account is held by Bank of America in London

    Someone told me that my founds are guaranteed by the Financial Service Compensation Scheme

    Anyone can confirm this?
  2. MTE


    If you account is segregated then your money is not part of the BAC and thus it is safe even if BAC goes under.
  3. What's the rule of my Broker (Infinity and RCG) on this?

    If they go bankrupt are my funds still safe?
  4. MTE


    If your account is "segregated" then it's safe irrespective of a broker.
  5. kxvid


    Wrong, if BAC fails you'll lose money even if its segregated. That being said:

    I have futures account money at BAC and I'm not worried. If BAC were allowed to fail, large parts of the US economy would collapse within days. Just read on wikipedia, BAC has relationships with 99% of fortune 500 companies.

    Dare I say, BAC may be the safest bank in the US. I believe the US government will defend the large banks until the bitter end; but might not have plans to save the small banks when they fail.

    I can't tell you how fast obama and co would be out of office if they allowed the largest US bank by deposits to fail, screwing the uninsured depositors. It wouldn't be an entirely logical move either, since they would still be required to pay out FDIC insured deposits 250k or less. The amount of money the government would save by allowing BAC to fail would be marginal, and the resulting damage done by a failure would vastly outweigh the costs of avoiding a failure.
  6. Thank you for your reply

    Who provides a guarantee of my funds?
    A law? An organization?

    If RCG goes to bankrupt (worst scenario) how can I withdraw my funds?
  7. MTE


    Refco was a perfect example. All the futures accounts were bought out by another firm within days and customers received all of their money. Forex accounts, which are under OTC business and thus are not segregated, lost pretty much everything.

    Segregated means that the funds are held in a special account, which are not affected by the fortune of the institution. Similar to a mutual fund industry, where the moeny is held with a custodian so if the fund management company goes out of business the funds' assets are safe.
  8. kxvid


    Agreed. But if the actual bank holding the segregated account fails, you're out of luck. I don't know of any president of this happening; I believe it is unheard of in the futures industry.

    I wonder how much futures account money is directly or indirectly exposed to BAC. If it were to fail, it could have a ripple effect across the futures industry. There is a high risk it would trigger defaults. It would also have an effect on the options and other markets.

    My broker Velocity futures holds funds at BAC, but they are small only about 40 million in segregated accounts. Clearinghouses could cover that with pocket change. If BAC failed it would certainly cause a huge mess of other banks to fail. It would be the end of the world as we know it.
  9. Yes.

    Citigoup and BanK of America hold assets that are +/- 30% of US GDP
  10. MTE


    I don't think so. Even if the bank holding the segregated account fails it cannot touch that money. The money in that account don't just dissipate into thin air.

    However, I agree that if any of these big banks fail then it would be the end of the world as we know it and the destiny of your futures account will probably be the least of your worries. :)
    #10     Feb 24, 2009