You are missing the point. There is a tremendous difference between getting your money back through a timely well ordered process and having to pay a lawyer to represent your interests in a bankruptcy preceeding and not knowing for many months when you are getting your money back and how much of it you are getting back.
I think you are missing the point You have to say if and when a future account has not been refunded, with the bankruptcy of a broker ....in the end 100% of Refco customers didn't lose a cent
i was with refco (futures) and didnt lose a dime. refco fx customers were not so lucky as we know as the funds do not need to be segregated. i believe the laws are different for bank clearing firms and fcm clearing firms. basically, you want to stay away from a bank as i 'believe' they can segregate all customer funds into one - as long as the customer aggregate account is separate from bank prop accounts. this still leaves you open if another customer goes bust. a pure fcm (like refco) segregates each customer funds separately, so each customer is safe if another customer goes tits up. ive read elsewhere on et that macquarie bank for example targets the bottom end of the ib space. i would steer clear from an ib if i discovered they were clearing my ib brokers business (which they wouldnt as i always clear with an fcm - part of our business plan) like i said, i 'believe' this is the case. i could be wrong - please feel free to disprove.....
No, you are missing the point, and jeb9 is exactly right. Customer funds must be available immediately and in full. Anything less is totally unacceptable. I can not understand why any brokers are even allowed to operate in any other manner.
You can't base your argument on the fact that refco customers didn't lose a cent. What about Griffin Trading?
griffen wasnt a broker. it was a customer of a broker - fortis i think. did other fortis customers suffer? no. again this has more to do with the difference on how banks and fcm's segregate their funds. other griffen prop customers took a hit because their money was aggregated in one customer account, but other customers of fortis were not affected. fortis clearing is an fcm - an off shoot of the bank. had griffen cleared via the bank, it may have been different - depending on how the bank separates customer funds if at all.
Griffin was an fcm and ncm -it was a host of different entities. I know it didn't clear Eurex, though I think it did it's business through Miespierson -I wouldnt swear on that though. Surely it was a cbot fcm -if that's what you call a broker -I know it was possible to broker trades through Griffin and Griffin only had a couple of prop traders -in Europe at least. But the ins and outs of Griffin aren't the point. When a financial institution blows up the liquidators just grab money from where it is most practical too. They apply the laws after the facts, and after they have taken a huge slice of the proceeds for themselves. Most financial insitutions have a whole variety of legal entities and it is impossible to be sure that your money is safe. I have always taken this as a fact -in the worst case scenario, trading futures, you will lose your money due to a rogue trader. I'm not aware that there has been any European or American legislation to sort out the problem of customer money being pooled in the last few years. Can anyone tell me with specifics if that is not the case?
The fact is the system is badly designed. With SIPC you have insurance that is very likely to pay out to predictable limits even under very adverse conditions. Segregation is all well and good if your firm has done the segregation properly that day. Recently Lehman customers in London lost almost three billion dollars (BILLION WITH A B) because a UK court ruled that the funds where not properly segregated. How many customers realize that if you are using funds to trade foreign markets US rules do not apply. Or that even if you are trading only US markets a troubled firm could simply "borrow" funds overnight that should be segregated and mix them with their own funds. Want to know the result of them blowing up the next morning? Simple ... unsegregated funds get thrown into the bankruptcy as assets of the firm ... not the customers. I am sick and tired of the Refco argument which tells us that because no one lost money IN THAT INSTANCE no one will ever lose money. Fraud is committed all the time and if you are with a firm that commits it by failing to properly segregate for even one day you are at risk. Anyone care to dispute that statement? Understand the segregation rules. Realize that which clearing firm has custody of your funds does matter and view the potential counter party risk as you would view any other business risk. Do not bury your head in the sand. BTW, the firms most mentioned in this thread IB, RCG and Penson are all well capitalized, sophisticated clearing firms. While those elements are far from a guarantee they they will be prudent it does increase the chances that they will. They have a ton of skin in the game and they lose theirs before you lose yours. One of the appeals that IB has to bigger players is that they are so tough on margins. Their business plan places a very high premium on having a very large cushion in stressful times. Hard for a day trader to get into their pockets when he goes down if he has five times the margin posted than he would at another firm. Their business plan clearly wants the aggressively futures player who seeks out thin requirements to trade somewhere else. Their rules do not suit me. I need more room than they are willing to give. That said, they have built a financial fortress to withstand the 10,000 year tsunami not the 100 year tsunami. If I had the capital I would probably decide that I wanted to trade from within that fortress. I know the word is they can be rude, customer service leaves something to be desired and that you practically need an IT department to deal with them at times. But when the shit hits the fan their customers are not even going to feel the need to shower later. Tell me what that is worth? Last but not least, do not assume because a salesman at a firm gives you a glib pitch about how your funds are 100% safe that it has any truth behind it. There is risk and the level of risk will depend on the clearing firm. Anyone who denies that does not have your best interest at heart.
Customers of Griffin Trading were not refunded fully and it went broke due to losses by a customer - the firm itself didn't make any losses or go bust until the customer blew up. This was despite Griffin being backed by a General Clearing Member (MeesPierson IIRC, which was a large Dutch brokerage house). In other words, one piker with a large account running into a black swan can wipe out your account and that of every other customer at a brokerage firm, and that's for a fully regulated US FCM. In addition, as a foreigner you have less rights under the racist US legal regime. Foreign Griffin customers lost more than US Griffin customers. So, since you are not a US citizen, you are first in line to get stiffed if someone does a Niederhoffer. With Refco, customer segregated funds did not get wiped out by one rogue trader, rather the firm itself went under. Segregated accounts do protect you against risk of a firm going bust, but they are pooled with other traders' funds, so they do not protect, but rather *expose* you to the risk of loss from other firm customers. I.e. if another customer blows up in spectacular fashion, losing more than the brokerage firm can cover, the customer funds are at risk and you can lose 100% of your capital overnight. They also don't protect against fraud by the brokerage or an employee of the brokerage. My advice is stick with IB with the majority of your funds, and put 10-20% with one of these other brokers as a daytrading & backup account.