How secure/protected are your assets at your Futures Broker

Discussion in 'Retail Brokers' started by technophile, Apr 25, 2007.

  1. I usually trade the SPDRs and now begining to trade the ES.

    The equities brokers carry SiPC protection usually for $1 million on your assets. This does not protect market losses but ensures your cash/equities will not be used by the broker for thier own purposes.

    I did not find any such protection from the few futures brokers I talked to. I am concerned about depositing $50K without any such insurance. Isn't this a valid concern or am I missing something?

  2. Yes, you do have a valid concern. You have absolutely no insurance protection in a futures account. You can lose it all, under some circumstances, if the broker goes bankrupt.

    You should also be aware that SIPC does not provide a million dollars of insurance coverage for securities accounts. It covers only up to $100,000 in cash, and only up to $500,000 in securities.
  3. If you're daytrading futures, IB would be good for you. They do charge you a carry cost (PER CONTRACT) for holding them overnight though, so just be aware of that. That's also only w/ unbundled pricing iirc, but unbundled is what you want, since you pay significantly less in commissions.

    IB is pretty secure financially too, they're not going bankrupt anytime soon.
  4. If another client incurs a liability then the remaining accounts can be used to pay off this liability.

    That's right, if someone goes bust your money is used to pay his debts. They don't even sell off the brokers shareholders assets first. It's like if your neighbour stops paying his mortgage and they come and foreclose on you to pay the bank.

    I am talking about accounts with CFTC "protection" here. This amazing fact was brought to my disbelieving attention when Refco went bust. I had funds with the CTFC part but learned that what I described above could have happened if there hade been a large client loss in the CFTC "protected" side of the business. I had previously thought that "segregated" accounts with CFTC brokers offered some kind of protection. It seems it is just made to look as if t does.
  5. How is money that is in a "universal" account treated, then?
  6. IB apparently sweeps it overnight into an account that falls under equities regulatory protection which is a little better. (SIPC or SPIC or whatever it is.)
  7. if you are truely worried, than use a broker like global since they use clearing first like GHCO/RCG more secure than an average account. If you got the cash, and are truely paranoid, trade through a private bank like Citi or JP Morgan, they'll setup all ur stuff, insure it, and setup tax shelters.