Best capitalized brokers which does not hypothecate?

Discussion in 'Retail Brokers' started by maxplanck, Dec 10, 2011.

  1. Which are the best capitalized brokers that do not hypothecate, and which offer a way to trade that is free of hypothecation through the entire order execution and delivery process (execution, clearing, etc)?
  2. dealmaker


    They all do if you have a margin account. The way around it is not apply for margin and strictly trade your own cash. Of-course this means your turn around will be much slower.....
  3. Can they rehypothecate if one has a margin account, but one is not currently using that margin?
  4. Thanks very much.

    Can you refer me to the source?

    I just want to make sure that I get this right, very important stuff
  5. rmorse

    rmorse Sponsor

    In a margin account, even if you securities are paid for in full, they can lend them out. In a cash account, they can not.
  6. Thanks for the clarification, much appreciated
  7. def

    def Sponsor

    That is not correct. The rule:

    Rule 15c3-1 (the “Net Capital Rule”) requires every broker-dealer to maintain assets in excess of its liabilities so that, if the firm fails, customers can get their cash and securities back. Under Rule 15c3-2, subject to certain notice requirements, a non-bank broker-dealer is permitted to use funds arising out of any free credit balances carried for the account of its customers in connection with the operation of the business of such broker-dealer. Rule 15c3-3 (the “Customer Protection Rule”) requires a broker-dealer to maintain physical possession and control (typically through third parties such as a clearing corporation, a bank, or another broker-dealer in compliance with Federal Reserve Board Regulation T) of fully-paid and excess margin securities, only with a value in excess of 140 percent of the customer’s debit balance (the “Fully Paid/Excess Margin Security Requirement”). If a broker-dealer’s securities lending agreement satisfies the requirements of Rule 15c3-3(b)(3) it is not required to maintain physical possession and control of securities. Registered broker-dealers must segregate its customers’ funds and securities from its proprietary holdings, protecting its customers from trading losses. If a broker-dealer fails, customer claims for funds and securities are given preference over any other claims.
  8. IB-AN

    IB-AN Interactive Brokers

    I can't speak for other brokers as you might be operating under some sort of special securities lending agreement, however, absent such agreement, a broker's right to place a lien upon and hypothecate stock does exist solely because the transaction took place in a margin account. The client has to be borrowing funds for this right to occur (which obviously cannot take place in a cash account).

    At IB, if you maintain a margin account but are paying for your purchases in full and not borrowing funds, it is the same segregation requirement as that which would exist in a cash account. The securities must be maintained in a good control location (e.g., segregated bank or central depository account) and cannot be pledged or hypothecated.

  9. western


  10. Be on the safe side, have a cash account. If you just have a small amount of margin you can be transferd over to UK..and your whole account is in danger, not worth it. Now a lot of brokers are not engaged in that practice, but there is no assurance that they can not decide one blue Monday, that to engage in somthing that is with in their -legal rights- and only needs to be reported off balance sheet -twice a year-
    #10     Dec 12, 2011