Under what circumstances would my money be in danger in IB futures account? Let's say I have $10K in my futures account and $30K in my equities account. IB bankrupts overnight. Does it mean that my $30K is insured and $10K is not. What happens if I move my money on daily basis from futures into equities account? What protection do large traders have ($1mil or more)? I don't understand how could someone (like guys from "market wizards") have so much money in trading accounts and not being insured.
I guess the only way to have some peace of mind is spreading your risk over different accounts at different reputable firms. Put some of your profits in an insured account and keep kruger rands in the safe in case the financial system blows up.
even if a firm goes bankrupt, customer funds are segregated. this will not protect you in the event of a rogue trader but given IB's risk mananagement I'd say the risk is pretty slight (i.e. position limits, not being able to place an order unless cash is in the account, auto liq, etc). For clients with big bucks - on the equity side additional insurance can be purchased. I'm not sure if insurance firms will offer insurance for futures. I should state that IB's health is very good. There is a write-up on the one of the subsidiaries investment grade S&P rating on the web site. financials are posted as well.
def I don't understand how is rogue trader factor different that bankruptcy. Can you please explain it in more detail.
say a firm goes bankrupt because of revenue shortfalls. In no way is it allowed, as it would be illegal, for a firm to touch customer funds to pay for bills, salary, operating costs, etc. By law, customer funds are segregated into seperate client/house accounts. These funds can only be used for client margin and nothing else. In fact, the CFTC regulates how firms can invest excess client funds (typcically they have to be ultra low risk - i.e. US Treasuries). Thus if a firm goes bankrupt in a manner mentioned above, the customers segregated funds would be safe. If however, a firm somehow allows a trader to put on a large position without adequate funds to cover margin, and a huge loss occurs and the firm is unable to post margin, the segregated cusomter account would be affected as well as the firm on the whole. Thus the importance of managing each and every accounts risk.
The more important question in my mind, is one of IB's computer system reliability. What has been your experience with their system? Stuck in any trades? Do you have a backup broker? Do they have a backup system?
Is IB selfclearing for futures too? If so are there any implications regarding customer's funds safety vs a broker working with a big clearing firm? Beyond the safeguards against retail customers failing to close positions or meet margin calls I would be more concerned about the proprietary trading operations of IB.
The IB Group is self clearing for US futures as well. I'm not sure if Timber Hill does the clearing for IB in the states or if it is the other way around. I beleive that Timber Hill does the clearing. Either way client funds are segregated by law from house positions as mentioned in the previous post (the house positions are for Timber Hill LLC). These rules were put in place to protect the customer.