do insured futures broker/FCM's exist?

Discussion in 'Index Futures' started by hedg, Sep 26, 2005.

  1. hedg


    trying to find info about account protection. I was told futures accounts are not insured. Is this true across the board?

    Any help is appreciated, thanks
  2. I interviewed all FCM's in Chicago listed at the time who would clear customer trades. None of them offer any insurance or protection other than the standard segregated account as required by CFTC/NFA regulations. This doesn't mean that there might not be any out there, but it is not something that I have come across.

    Good luck.
  3. so if account segregated how could anyone steal your money? could the firm going under jeopardize your funds?
  4. hedg


    Thanks FT71 ~ Expressfutures makes insurance claims, following that one up.

    bankruptcy due to unforeseeable events maybe isn't an issue for FCM's.

    ETF's model of having multiple exchanges with server farms, seems to me the best structure/protection in an emergency.

    Maybe clearing firms and exchanges (cme/cbot) use this same type of fail safe architecture.

    I'll post any relevant info i come across.
  5. Steve_IB

    Steve_IB Interactive Brokers

    Segregated just means segregated from the firms money. Your funds are not segregated from other clients money.

    So if a firm offers ultra low margins, and has a number of clients who accrue large negative balances who then refuse to pay the margin call.....
  6. Steve_IB

    Steve_IB Interactive Brokers

  7. ellokn


    When thinking about the safety of your segregated funds its important to consider the capitilization of your FCM.

    If a poorly capitalized and/or managed clearing FCM goes under because one or a group of clients cannot meet exchange margins at the end of the day, the FCM is shut down and your funds will be frozen for as long as a few weeks as it is sorted out, but not lost.

    No one wants that to happen and it is an extremely rare, but not unknown event.

    Up to date information on FCM capitilization can be found here:
  8. Forgive me Steve, but why should I be paying for the consequences of someone messing up its own accounts, it aint that fare. I understand that in IB case that would be a remote possibility but sure raise some concerns in case of other brokers especially fx that offer something like 100-400:1 leverage.
  9. Steve_IB

    Steve_IB Interactive Brokers


    Ellokn sums it up well in the post above. It's a rare occurrence in the futures world as it's pretty well regulated, but it can happen.

    As for FX, well this is completely unregulated so happens too often. Unfortunately there is no central database that I know of which details how often it has happened. In Hong Kong it happened so often, that the SFC decided to regulate FX in the 1990's and now imposes much higher capital requirements and license fees for FX brokers, than it does for stock or futures brokers. They also set maximum leverage of 20:1 (initial).
  10. hedg


    thanks guys for the dialog, information and links, really appreciate the helpfulness.
    #10     Sep 27, 2005