Depositing Treasury Bond @ Clearing Firm

Discussion in 'Retail Brokers' started by FroggerMan, Dec 21, 2012.

  1. If you deposit a treasury bond at your clearing firm and they go bust do you get that back or will it be divided up between everyone at your firm just like cash would be?
     
  2. 1245

    1245


    Securities in an account are safer than cash. What typically happens when a firm goes under is that the securities in your account get transferred to another BD. Since securities are hard to steal, SIPC normally has no problem doing this. Even in street name, there is a Leger saying how owns what. If your broker stole cash or if your cash is missing for any reason, SPIC will start with the limit of $250K per account, then do the best they can to recover the rest, which can take time.

    In the end, if your account is way above the SPIC limits and your concerned, it may be worth while deposited or buying short term T-BILLS. There will be a cost to doing this. You will always be borrowing money on debit balances and your buying power will be reduce slightly.
     
  3. I believe that in the MF Global case they did not give TBills any special priority but liquidated them and pooled the result with cash for the purpose of preliminary distributions on a percentage basis etc. There was no advantage to TBills over cash.

    The same in the PFG case.
     
  4. 1245

    1245

    These were not security accounts and not covered by SIPC.
     
  5. seadog

    seadog

    Depending on what you trade, and the type of broker, customer's funds should be in a segrated account.Which means your funds should be safe, however, illegal acts .....all bets are off.The government insurance should cover some of it.
     
  6. 1245

    1245

    There is no government insurance either directly or through an agency that backs the accounts for futures and fx trading. Segregation only protects your account from other customers.
     
  7. seadog

    seadog

    Thanks for clearing that up. I didn't realise the insurance had different regulations for different instruments.
     
  8. 1245

    1245

    What SIPC Covers... What it Does Not

    The cash and securities – such as stocks and bonds – held by a customer at a financially troubled brokerage firm are protected by SIPC.

    Among the investments that are ineligible for SIPC protection are commodity futures contracts (unless defined as customer property under the Securities Investor Protection Act) and currency, as well as investment contracts (such as limited partnerships) and fixed annuity contracts that are not registered with the U.S. Securities and Exchange Commission under the Securities Act of 1933.

    It is important to recognize that SIPC does not work the same way as the Federal Deposit Insurance Corporation in terms of blanket protection of losses. For more information click here.

    http://www.sipc.org/How/Covers.aspx
     
  9. The original poster did not mention SIPC. Posting tbills as margin would suggest he has a futures account, where SIPC is not applicable.
     
  10. 1245

    1245

    That's true. However a T-bill or T-bond is a security and can only be deposited in a securities account.
     
    #10     Dec 22, 2012