Is Your Brokerage Account Safe? http://www.smartmoney.com/invest/stocks/is-your-brokerage-account-safe-1326150381913/
Checking IB's web site this morning I noticed they state you have the option of where to sweep excess funds. I hadn't checked before today. Going to Account Management -> Account Administration -> Excess Funds Sweep Gives you three options: Do not sweep excess funds Sweep excess funds into my IB securities account Sweep excess funds into my IB commodities account
"Regardless of your choice, IB will generally keep a small buffer of excess margin funds in each account in order to prevent excessive transfers back and forth as your margined securities and futures positions fluctuate in value."
hello all; this is my first post; been a long time stalker of this forum; but never took the time to join until now as this topic is a major concern to me. I have an account with ib and have been completely happy with ib; however, ever since mf global ive been concerned. I am primarily a stock trader but have traded futures on occasion; but not since the mf global incident. Since MF Global, I have opened two additional accounts that are cash only (one is an indivdidual and the other is an ira) and that have only been approved for trading stocks and bonds... im still in the process of transfering all the cash into these accounts (still have a few open stock positions in the margin account). I was thinking of keeping one margin account; however, the following statement on the ib site gives me hesitation: "Your stocks, options, warrants, debt instruments, and cash -- denominated in all currencies -- are covered by this protection. Futures, and options on futures are not covered. As with all securities firms, this coverage provides protection against failure of a broker-dealer, not against loss of market value of securities. For the purpose of determining a customer account, accounts with like names and titles (e.g. John and Jane Smith and Jane and John Smith) are combined, but accounts with different titles are not (e.g. Individual/John Smith and IRA/John Smith)."...end quote http://individuals.interactivebrokers.com/en/p.php?f=ibgStrength&p=a You need to hit the tab called account protection to find the quote. It seems to me that if i have any type of margin account with the same name and type (ie: individiual or ira); then it does not matter if i have a cash account; the cash account will still be considered a margin/future account and not be covered. It would be helpful if ib could include a way to completely ensure that cash and margin accounts are not tide together even if it meant imposing limitations on transfer between accounts. For now, I am left with the decision then to close my margin account because as long as it remains open; my cash account will be considered a margin/future account...even if i dont transfer money between the accounts and even though my cash account is not approved for futures. One other thought, it will be interesting to see if can close my margin account after i have transferred all my cash as the margin account was my original account. Once again, ib has been an excellent broker; i am only concerned with protection of my funds. Anyone have any advice or thoughts.
Of course, if you have now 3 accounts at IB that does not help you. To get added protection, you need accounts at DIFFERENT brokers. I personally dont want to "diworsify" my brokers however. IB is perfect for me. That means I am working to lobby IB to address the only shortcoming they have: They are not TBTF and consequently their accounts are not 100 percent safe.
I think you are mistaken about this. The distinction is between "securities" and "commodities" (i.e. futures), not between cash and margin. A universal account at IB gives you both securities and futures sub-accounts, but you don't have to use both. The securities sub-account has SIPC and private insurance regardless of whether it is margin or cash. Only the commodities sub-account is uninsured. If you are not trading commodities, once your commodities balance is zero, you are fully covered. You can have multiple securities accounts with the same broker, but the balances are combined for insurance purposes. The only way to get additional insurance is to spread your accounts among multiple brokers.
yeah that sounds right, that's the way we all understood it when we signed up. The problem started when cash from the commodites was no longer being swept into securites and then was further compounded by SIPC stating they weren't sure if cash that had been swept was still covered. You sound like you know a heck of a lot more about it than me and we all hope you are right. But some of us are shaken up enough to only keep trading money at IB and keep buy and hold money somewhere else.
By logging into "Account Administration" > "Excess funds sweep" and selecting "Sweep excess funds into my IB securities account" it seems to me that IB gives you as much SIPC coverage as can be achieved through a single broker. For my "selection" I chose "Do not sweep excess funds" as I am for now OK with leaving part of my excess funds in the commodities account. I spread my risk and SIPC coverage by using several brokers; However, I consider my IB universal margin account to be my only really important must have account.