I totally agree. Brokers might as well use client funds to write teeny puts, keep them off the books, and pay the premium back in lower costs. All the bs out of cme group about how their products allow their customers to better manage risk is a joke at this point. Thanks to the brokers, all they allow for is their customers to trade known, quantifiable risk, for unknown, unquantifiable risk. It's totally insane. I'd be only half surprised to find out that the exchanges are now lobbying for their brokers to be more heavily regulated, like opposite day in Washington.
The concept of raising commissions/costs 10-fold would most likely drive all the customer traffic elsewhere. Instead, clients would just pare down their exposure to the bare minimum and operate per usual at the low cost provider. It's also not written in stone that if an FCM were to raise these costs 10-fold that they would then stop playing fast and loose with the loopholes. Instead, it would more than likely incentivize them to really push the envelope of firm profitability. We are talking about the financial industry where any nook and cranny is explored to make another buck. I'll repeat it until I'm blue in the face. It's ZIRP, stupid.
Some of us full time traders have balances that far exceed SIPC limits. Furthermore, the SIPC has operated in a manner that gives me no confidence it will even back up its promises. http://thehill.com/blogs/congress-blog/economy-a-budget/120483-sipc-has-fail
so who is on your side and who is on the side of the people who want to continue to use these tricks and loopholes against you? "As they promised they would, the overwhelming majority of Republicans on Wednesday filibustered Richard Cordray, the man President Obama tapped to be the director of the new Consumer Financial Protection Bureau -- an agency tasked with mitigating fraudulent and dangerous financial products."
If you were smart enough to accumulate an account exceeding SIPC limits, you would also be smart enough to open multiple accounts under the SIPC limits.
That article knocking SIPC is ridiculous too -- I was shocked that those invested in Madoff expected to be covered by SIPC -- there was no brokerage or financial institution failiure there, they INVESTED in a fraud -- Enron shareholders did the same thing, should they be SIPC insured? No.
when he was smart enough, this problem wasn't even on the radar ..just a scenario...,now that it is,and if we have a meltdown,lets say you were long a boatload of puts and made a killing,but your clearing firm took a bath,what do you think your chances of closing out the acct and getting the cash are....are you still as confident as you were 3 years ago...clearing firm is not going to send out a memo to clients warning them of future solvency