It could ABSOLUTELY happen if executives at IB decided to move client funds FROM segregated accounts to company accounts, just like Jon Corzine did. http://www.businessinsider.com/rehy...is-a-different-story-of-filched-funds-2011-12 Rehypothecation can lead to potential problems, but my view, as of today, is that the MF case is straight THEFT. Corzine & Abelow must have known about 8- and 9-figure transfers FROM Customer Segregated Accounts, to NON-SEG. accounts. ...You can put a police officer on every corner, but people will still steal if they feel so inclined. We need to focus on enforcement.
Yes they certainly knew about the margin calls. But they may have also known that regs are unclear on whether funds need to be segregated continuously. It might be that they self-report a weekly margin call for the segregated "Reserve Bank Account," and just have to make sure they meet any deficiency by the following Tuesday. But MF was auto liquidated first thing Monday due to the shortfall carried over the weekend. I speculate on this only to point out that we may need more than enforcement, we may need rule changes. See pages 8 & 9 for background on this: http://www.finra.org/web/groups/industry/@ip/@reg/@notice/documents/notices/p122388.pdf
What we need is the death penalty for crimes of this nature. Best Case , they are afraid to do it. Worst Case, we get rid of some scum. Win ,Win. No need to thank me. Society loves to pussyfoot around the obvious, ya know.
Interactive Brokers LLC does not engage in proprietary trading: "Our brokerage companies conduct no proprietary trading." https://www.interactivebrokers.com/en/p.php?f=ibgStrength&ib_entity=ibg That is a huge difference assuming that MF Global carried out proprietary trading right within the same company, which I believe was the case (please correct me if I am wrong). (Timber Hill may do so but it is a legally separate company).
Not quite a difference based on the phrase alone, since IB do engage in proprietary trading via Timber Hill, and MF Global had tons of positions at the holding company level. To me, the most importance difference between the two - other than the obvious fraudulent behaviour of MF - is that Timber Hill is a market making machine, and a clever one, it doesn't sit on positions and leverage its balance sheet like MF and the typical bank. It's a smart strategy, as any professional floor trader can confirm you. And it's easily confirmed by IB's balance sheet: it's quite different to have 4bi in equity vs 10bi in debt, of which almost all seems to be margin loans (8 Bi of loans) so that CLIENTS can leverage (not IB), compared to MF's 27bi in debt (of which apparently only 3.7 was to margin loans) and only 1bi of equity. What a shame. But despite all this, what really is different is this: If Petterfy gambled to the hilt and lost, he would lose his entire fortune build over 40 years, since it's his main asset. If Corzine did the same, he would take the company down, but only step down as CEO and maybe still go home with a golden parachute.
But there is one troubling thing about Petterfy, he was buying MF stock all the way down. Clearly he doesn't have good judgement when it comes to spotting balance sheets that are likely to run into problems
Peterffy was only interested in the brokerage part of MF. He was happy to buy the brokerage part for $1billion.. if it wasn't for the missing funds it was a done deal (even after all the bad bets that corzine did in the other parts of MF).
$28 million was his investment. it is money but in the scheme of things does it have any significance?