IB's Subordination Agreement?

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

  1. What is up with this??

    Is this any different than things before??

    My take of it after one read is that it limits liability of IB if they take our money, put it into foreign currency, and that currency collapses..??

    Doesn't sound like a good risk to be taking...
  2. qdz


    Another agreement?

    I am really worried about my money in IB. That's why I only deposit the minimum that I can afford a 100% loss both financially and emotionally. That's not necessarily the trading loss. And I will not add throw in more in any circumstance.

    NASD/SEC, how do you protect our interests in these cases?
  3. Bung what's all this talk about a subordination agreement? Please enlighten me.
  4. def

    def Sponsor

    can you pm me with a link to the agreement. with a universal account you can move currencies as you please. IB will not xfer currencies for you (unless you do a trade in a foreign market). If you do a trade overseas, your profits/losses remain in the foreign currency until you xfer it back into your base currency. The agreement probably is just to say if that foreign currency collapses, it is your loss.

    As for money being safe with IB, it was recently ranked the most financially secure brokerage in America via the Weiss ratings. If you are concerned about the firms capital, read the S&P report on the web site.
  5. qdz


    Thank you, def. I will check out the references that you gave.
  6. well, I logged into my acct from acct login on the main page

    got a message that said i have to do market data selections, which i did

    and another message (both messages from main acct menu) that said i also had to complete trading permissions

    clicked the trading permissions link, and got the following list of products to be checked...

    The US Single Stock Futures
    The US Security Exchanges
    The US Security Option Exchanges
    The US Futures
    The US Futures Options
    IB IDEAL Exchange (FOREX)
    The Sydney Futures Exchange (SNFE)
    The EUREX Market Center (SOFFEX)
    The EUREX Market Center (SOFFEX Options)
    The Swiss Exchange (EBS)
    The VIRT-X Market Center (VIRTX)
    The EUREX Market Center (DTB)
    The EUREX Market Center (DTB Options)
    The XETRA Market Center (IBIS)
    The Matif and Monep Market Centers
    The London International Futures and Options Exchange
    The London Stock Exchange
    The Hong Kong Futures Exchange (HKFE)

    ...so I checked the first three (i had a stock and options acct prior to the univ acct "upgrade") and clicked "update"

    it said i had to complete various things - the stock and options exam, and the futures exam - which i did - (i passed those tough exams with flying colors - the computer told me i was the smartest guy who ever took the test :D) - maybe 4 or 5 things to complete altogether - and one of them was the subordination agreement - which i'll post below (mod please yank it if IB gets p!ssed) -

    "Interactive Brokers LLC

    Subordination Agreement

    The following Subordination Agreement is required under CFTC Interpretation 12:

    Funds of customers trading on United States contract markets may be held in accounts denominated in a foreign currency with depositories located outside the United States or its territories if the customer is domiciled in a foreign country or if the funds are held in connection with contracts priced and settled in a foreign currency. Such accounts are subject to the risk that events could occur which would hinder or prevent the availability of these funds for distribution to customers. Such accounts also may be subject to foreign currency exchange rate risks.

    By signing the accompanying acknowledgment the customer authorizes the deposit of funds into such foreign depositories. For customers domiciled in the United States, this authorization permits the holding of funds in regulated accounts offshore only if such funds are used to margin, guarantee, or secure positions in such contracts or accrue as a result of such positions.

    In order to avoid the possible dilution of other customer funds, a customer who has funds held outside the United States must further agree that his claims based on such funds will be subordinated as described below in the unlikely event both of the following conditions are met: (1) the customer's futures commission merchant is placed in receivership or bankruptcy, and (2) there are insufficient funds available for distribution denominated in the foreign currency as to which the customer has a claim to satisfy all claims against those funds.

    By signing the accompanying acknowledgment the customer agrees that if both of the conditions listed above occur, the customer's claim against the futures commission merchant's assets attributable to funds held overseas in a particular foreign currency may be satisfied out of segregated customer funds held in accounts denominated in dollars or other foreign currencies only after each customer whose funds are held in dollars or in such other foreign currencies receives its pro-rata portion of such funds. It is further agreed that in no event may a customer whose funds are held overseas receive more than its pro-rata share of the aggregate pool consisting of funds held in dollars, funds held in the particular foreign currency, and non-segregated assets of the futures commission merchant.

    Signature "

    ...so I'm not really sure exactly what it is that i am signing. all the other stuff was just like before, including the market data stuff, but the sub agreement seems pretty new...

    i never checked anything about currencies or futures options, only stocks, stock options, and SSF's...
  7. def

    def Sponsor

    I believe this is just a standard agreement. It states that if you have cash in a foreign currency and the firm goes bust, your claims may be settled in dollars.

    Funds would only be in foreign currency if you moved them there or opened the account in a foreign currency.
  8. right on, thx again for your help, sorry for the confusion. when i read it last night, it sounded to me more like if IB had holdings in foreign currencies that went against them, it could jeopardize customer funds...

    my bad
  9. yeah i see it now - i apparently totally missed this part-

    "...if the customer is domiciled in a foreign country or if the funds are held in connection with contracts priced and settled in a foreign currency..."

    thanks again def
  10. chisel



    I'd feel much better about my money with IB if they dealt with a Weiss "A" rated bank.
    #10     Nov 8, 2002