IB's liability in Universal Accounts...

Discussion in 'Retail Brokers' started by bungrider, Nov 7, 2002.

  1. Do we have SIPC protection (not that it's worth a damn) for CASH and STOCKS in a Universal Account??

    If I never trade SSF's, but have a universal account that is authorized to trade US Stocks, Equities, and SSF's (but NOT any other futures), what protection do I have??

    -does this change if I trade SSF's, but never hold overnight?

    -does this change if I hold SSF's overnight?

    -how does one separate liability of futures products and equity products from the same account??

    -am I safer keeping the accounts separate (meaning having one account only authorized ONLY for US Equities and US Equities Options, and another account authorized for SSF's)??
  2. My understanding is that all cash is moved nightly into the SIPC covered equity account. So if you don't hold futures overnight, you should be covered.
  3. qdz


    I don't know the answer to your questions. They are my concerned too. I'd like to hear any suggestion and am going to cancel my pending ss upgrade.

    I once heard about this "credit risk" somewhere when they are talking about using arbitrage to eliminate both price and credit risks with the same issuer. Seems there is big risk even when cash is just sitting there, not just as "small" as interest.
  4. def


    futures are not covered by SIPC. However, a unique feature at IB is that excess funds are swept into the securities portion of the universal account each evening which thus gives you SIPC and the additional 10 million bucks insurance protection.
  5. but what i'm asking is that if i have an acct that trades both stocks and futures (SPIC protection is per account, not per investor), does trading futures thru the same acct negate any SPIC protection i may have on the acct??

    imagine this-

    let's say that i have 50k in my acct. i have an SSF position which has an outright value of 50k with 10k in margin requirement. i also have a stock position with an outright value of 100k and a margin requirement of 25k.

    at the same time, top IB execs start smoking crack and decide to flee to rio de janiero with most of the firm's capital...

    how much cash do i get from the SIPC??
  6. def


    Client funds are fully segregated from proprietary funds and thus there would have to be fraud at a massive level with numerous signatories and banks involved etc etc. I'll have to state that IB has a long track record, history of integrity, solid financials, etc etc. ....

    You do have a point. If you maintain open positions in SSF's then your protection comes from the firms margin requirements and risk controls. IB's strict implementation of these controls should give as much if not more comfort than any other futures broker.

    Soon.... IB will allow clients to choose whether their SSF positions are placed in their securities or commodities account. There are benefits to each. Securities: fungible with other positions, SIPC. Commodiites: better initial and overnight margin (20%) and not subject to PDT rules.
  7. m22au


    Is it possible to remove SSF trading privileges after getting them?
  8. def,

    thx for your help. i wasn't trying to imply that IB isn't stable or anything like that, i was just making a hypothetical situation where the SIPC might actually be expected to pony up some cash, (not that they're ever paid anyone anything...)

    SSF's seem cool, but i don't need to use them and i don't have any interest in arb, so if enabling my account for them gives me LESS protection than i had before, then for me it's not worth trading them.

  9. alanm


    def: Is the purpose behind being allowed in a securities account to allow one to carry an SSF through expiration and settle into the underlying (like options)? Will this also then allow you to treat spread positions like long SSF/short underlying according to their (minimal) risk profile, instead of requiring 20% on the SSF plus 25% on the underlying? That would be nice.
  10. You bring up an interesting point: My understanding of the PDT rules is that they apply to "securities". Is an SSF that is held in a securities account a security? Or is it a future that is held in a securities account through various enabling rules/regulations? If it is a future then the PDT rules should not apply.

    #10     Nov 8, 2002