How Many of You Lied to IB?

Discussion in 'Interactive Brokers' started by Corso482, May 28, 2004.

  1. jessie


    One thing to keep in mind when trading in a margin account, whether futures, stocks, indices or options, is that you are liable for all losses, not just what you have in your account. If you were short a ten-lot in beans today, you would be down $25,000, and unable to close the position as it closed locked limit. It wouldn't matter whether the brokerage wanted to cover your position and close you out. One more day of that and there goes your 50K net worth, which is why they want to make sure you can cover your losses, because if you can't, they have to. If I remember right, cattle had about 5 or 6 consecutive days locked limit down last year, and a two handle move in bonds, fairly common these days, is also $2000/contract, taking place lately in a few minutes after a report. Lately, the futures markets haven't been a friendly place for the undercapitalized. If you tell the truth on an application and then blow up, you may have recourse under the "know your customer rule" if you were allowed to overtrade. If you lied, you are stuck, and will be paying off the debt for a while.
    #21     Jun 1, 2004
  2. def

    def Sponsor

    You seem to have a problem with telling a firm that will lend you money and allow you to take risk your net worth. Here's a quote from an SEC governors' speech.

    "Let me mention something more specific about suitability as it relates to compliance. A firm cannot abdicate its suitability duties by simply not asking its customers for certain information. Lately, conversations with firms about suitability frequently generate the reply "we don’t collect that information." In case firms need a reminder, suitability requires "reasonable efforts" to collect information before making a recommendation. Adopting a practice to avoid collecting information relevant to a suitability analysis does not prove the absence of a recommendation or a suitability obligation online."

    I know the client suitability rules and I know that a broker must make a reasonable effort and has a fiduciary responsibility to determine whether or not a client is suitable to trading certain products (i.e derivatives, use of margin, etc).

    I'm glad you passed the information that we request this information on to many UK traders. The one's that understand that their broker or potential broker follows the rules and makes an effort to protect themselves (and thus their entire client base) by only allowing suitable clients to trade are usually the more valuable clients.

    Finally the e-mail prompt: I don't think it takes a rocket scientist to figure out that we send an automated message out to those who started but didn't complete an application. (side note, clients actually suggested we do this as it helped speed up the application process).
    #22     Jun 1, 2004
  3. Hi Def....first off, I hope everything is going well in your "far off land."...and also glad that you can bring some light to this discussion. We both have seen the ET board get blurred from time to time between the Retail trader and the Prop trader. We both have certain responsibilites, and each have certain disclosure requirements.

    From my Series 7, I seem to remember that for margin accounts the investor has to disclose their financials, or at least sign something that states that they meet the minimums. I also know the accredited investor requirements ...(I think, it's been a while, lol)...$1Mil or $250K per year for last 2 (maybe 3) years., etc.

    One question I do have is whether or not IB has tightened up their disclosure requirements for some reason/regulation that I am not aware of....

    Help us out...

    #23     Jun 1, 2004
  4. def

    def Sponsor

    Whether or not one is an accredited investor has nothing to do with the ability to open an IB account.

    Did we tighten things up? Some brokers require minimum deposits of 25K to open an account. Others like us don't and thus ask and gather information in an effort to make sure clients are suitable for active trading. Like it or not, someone without reasonable net worth or income, shouldn't be actively trading.
    #24     Jun 1, 2004
  5. jem


    I for one think anyone should be able to step up to the computer and give it a shot.

    This is supposed to be the home of capitalism.

    Let me see. Lose as much as you want going to Don's home town. But do not try to small amounts of money in our market.

    My conclusion is that we have a bunch of paid of clowns creating laws in this country and it this not a good thing.
    #25     Jun 2, 2004
  6. def

    def Sponsor

    won't disagree with you in principle but there are a few diffs...

    1. Leverage: in vegas - normally you can only lose what you put in (if the house gives a marker, i'd assume they do their own credit checks). Some brokers will take long only accounts. Such clients may not be suitable for a trading platform such as IB's (nor are they our target client)

    2. Risk: if a broker loses because of a bad debt, it could cost all clients if the loss bankrupts the firm (this has happened a few times)

    3. dubious brokers - past and present - have failed their fiduciary responsibilities towards their clients and the regulations put into place are a reaction to the abundance of snake oil and fraudsters that abound in this industry.
    #26     Jun 2, 2004
  7. alanm


    I think there should be minimum requirements and passing of some sort of literacy and sanity test in order to post on this board.

    dav10: Take a good hard look at what you wrote in this thread and in others, and compare it to some of what Don Bright, def, and many others spend their valuable time contributing to this community. Do you honestly think anyone would want someone like you, or anyone who listens to you, as a customer?
    #27     Jun 2, 2004
  8. zelareka

    zelareka Guest

    america is more and more full of socialists telling us what we can or cant do for "our own good"..
    #28     Jun 2, 2004
  9. What with the terrorist threat hanging over everyones heads it
    makes good sense to keep the risk of bad debts happening to
    IB very low. Anyone who thinks otherwise is not thinking correctly...
    #29     Jun 2, 2004
  10. I suppose that the part of americans who don't care about what is really good for them still predominates.
    #30     Jun 2, 2004