First, the odds of this happening of course are significantly low. Second, I'm not a lawyer but I'm pretty certain the statement on the FAQ is correct and that we'd have an obligation to use IB capital to pay - so no catch. However, I suggest you go to the source - the rules and regulations from the regulators - to get a definitive answer to your question.
When you deposit your money in an account with IB, or any other broker, that deposit becomes an obligation of the broker. If the money is deposited in an institution that ultimately fails, your money is still an obligation of the broker. That's why the level of IB's capital is important. It is the first level of guarantee to any customer who has funds on deposit at IB. What will not happen, if this is what you're trying to say, is that IB will not return your deposit because it in turn was deposited at a failing institution, while still possessing net capital. So the answer to the question that you posed above is "yes". The only question at that point would be whether the capital is sufficient. Beyond this, in the event that IB fails, your deposit has further SIPC and/or private insurance guarantees. OldTrader PS. I presume you won't be reading this since you have me on ignore. LOL.
I do not trust Interactive Brokers. What about the 10 million dollar mistake where they granted some young kid too much leverage by accident? Who knows how many wreckless kids are daytrading away using too much leverage while IB turns a blind eye? Somehow I have this feeling that every dollar at IB is stowed away at Citibank that is insured by the insolvent FDIC. Do I feel safe with my money at IB where they allow young kids to overleverage themselves causing massive losses to the firm? Quite honestly, I would rather place my money in a wall then IB. I do not trust all that is going on and I will certainly not place faith in insolvent government institutions.
You have zero credibility and have no clue what you're talking about nor any understanding of the market making business. You're also talking about 10 million for a firm that made over 1 billion USD in profits. nice try though.
I'm sure you understand that that's not the point. As I have pointed out a few times now, I already have a definitive answer. I am posting this for the benefit of other IB customers, as a response to your contention that IB would use its own funds to make any and every customer fully whole if said customer suffered losses that arose as a result of the failure of a company other than IB. It is explicitly stated in the agreement signed by every IB customer that this is not the case and that IB bears no responsibility for losses that accrue as a result of events such as the ones we're talking about. Once again, IB customers in Canada have CIPF protection up to $100,000 total so if you have less than that in your IB accounts, you should be protected; however, I am still waiting for a confirmation of that, as I always suspect the fine print might tell a different story.
You got a link to something about this "accident"? I would gather that at least some readers might know that you post many anti-IB posts, and that therefore, we might need some sort of outside, indpendent verification of your claims. OldTrader
Def You may put this whole thing to bed ( or not ) by listing the banks that IB uses and the % with each. Statements like "spread among the largest banks - as of Sept. 2008" are well intended but pretty useless given all that has happened since Sept. 2008. There was a list published recently re: the 50 Strongest Banks in the World. http://finance.yahoo.com/news/Of-50-Safest-Banks-4-in-zacks-14582129.html From my point of view - the greater the ( quantifiable % ) of assets are with these banks, the better I would feel.
You don't have a "definitive answer" to the question. Please see my prior post regarding this. OldTrader
Why are people concerned when IB money is CIPF (for Canadians) or SIPF insured? Especially for Canadian accounts who have up to $1,000,000 insured...
I believe Old trader has it right. You are messing with semantics. The regulators have final say. They are they source.