IB customers: vote for better security!

Discussion in 'Retail Brokers' started by freedinner, Dec 9, 2011.

  1. The "IB hypothecation" thread has gone to 200 posts and 20 thousand views in just a few days.

    Rather than trying to become a hypothecation expert in countless hours, why don't we make sure our stocks and assets belong to us in the first place?

    The industry practice of holding assets in "street name" is unsecure and dangerous, both to us and the brokers. It means customer assets are listed on the broker's balance sheet, artificially increasing its leverage numbers, while not giving customers the ultimate ownership of their own assets. It means that brokers are susceptible to bank runs since customers are now trained to run for the exits at the slightest hint of trouble.

    The only one profiting from this "street name" stuff IMO are the large too-big-to-fail Wall St banks, because it prevents nimble competitors like IB to effectively compete for large accounts.

    IB is a great firm that has led the industry in the past to best practices. I am working to convince them to lead the industry once again to a more secure and sustainable model.

    As a first step, please consider supporting my feature poll #7549 suggesting at least the option for an IB customer to register stocks in his own name.

  2. Remember, while IB having excess SIPC insurance is laudable, the maximum Lloyd's will pay out under this insurance is 150 million to all accounts.

    This compares to about 4 billion of equity in hedge fund and prop trading group accounts at IB, that can be assumed to on average be substantially larger than the 500k SIPC limit (see slides of Thomas Peterffy's latest presentation, 15pct of IB's total customer equity ~25B from hedge funds and prop trading groups).

    That means, in worst case, payout rate under this insurance would be 4 percent of equity for anything above 500k.