Is cash no longer fully insured in an IB account ?

It's not really tailored for MF Global, the questions are standard, Lehman Brothers brokerage looks the same. All questions based on repos (so that you identify your security that is in MF Global's possession) or if you are certain types of employees or stakeholders in MF Global (that SIPC doesn't insure)
I don't recall neither in MF nor Lehman with a situation where a person had an account trading a bunch of currencies, futures and stocks - and there certainly were a lot of them in both institutions in a setup very similar to IB - where SIPC ever asked for proof of use of the cash. Because? IMO because that's impossible. It's impossible to attach the cash to a certain use in an operation. I have dealt (not with SIPC - unfortunately in this case) with Refco futures and Lehman derivatives after the bankruptcies and one thing I can state is that it's everything very standard, to be processed in batches.

 

We'll see if it ever happens (I doubt it it ever will with IB).

Personally I think they would have to inquire into this, now that they have explicitly stated that they will not insure this situation (cash from futures accounts or currencies trading in a securities account). Otherwise this newly-stated policy would be meaningless.

I do not think their policy was intended to be meaningless and unimplemented.

Everybody at IB has a Universal account (unlike prior brokers who failed) with sweep capability so there would be a focus on the issue right from the start.

 

Another one: TD Ameritrade for futures https://www.tdameritrade.com/forms/TDA600.pdf has a sweep system and they just seem to think whatever funds are in their securities account are insured. Also another similar system to IB, and to MF Global - which wasn't very automated but in any case if you wanted to trade with them futures & stocks you had to have both SIPC and Futures accounts.

 

velosoandre, it appears that IB may no longer be promoting SIPC coverage of forex and excess commodities cash.

Have you checked with them to make sure they haven't changed their position on this issue?

 

I have requested a wire withdrawal from IB 2 weeks ago
It has been 10 business days and 15 calendar days and there is no sign of the wire yet. They are inquiring with the bank and have currently no clue of the wire whereabouts.
Their service is extremely POOR, and i find them completely unreliable.
I do not care whether it is the bank's mistake or not! I have made cash deposits that got through within 2 business days and the 1st time that i asked for a wire withdrawal i have been getting the most unreliable and BAD service up to know.
Been with them for 3 years and i am considering closing my account finally

 

I have asked... basically they said it's up to SIPC to define if the cash is to be considered "for the purpose of purchasing securities". Well, I guess SIPC created a very single mess with a law that simply can't work in practice. I hope it still is covered like it has always been the case... For instance, MF Global had 800+ claims from securities accounts, they have access to most world exchanges, they were market makers in so many bond markets, they did FX too... they simply HAD to have clients that could be challenged, yet their forms was just as it has always been.
Hope they don't open another pandora's box in the future.

 

A new IB forex disclosure statement is now online.

https://www.interactivebrokers.com/...tration_1/forex_mult_curr_risk_disclosure.jsp

SIPC coverage is addressed on page 3.

 

i am done with IB as well and am currently looking for a new broker. who are you looking at??

 

Specifically:

"Interactive Brokers LLC is a member of the Securities Investor Protection Corporation ("SIPC"). SIPC protects cash and securities held with Interactive Brokers as specified in the Securities Investor Protection Act. SIPC protects cash, including US dollars and foreign currency, to the extent that the cash was deposited with Interactive Brokers for the purpose of purchasing securities.

Whether foreign currency in your IB account would be protected by SIPC would depend in part on whether the cash was considered to be deposited with Interactive Brokers for the purpose of purchasing securities. Interactive Brokers expects that at least one factor in deciding this would be whether and the extent to which the customer engages in securities trading in addition to or in conjunction with forex trading. For further information, you must contact your own legal counsel or SIPC."

which says that cash deposited for trading forex alone is not protected.

 

What should the following trader chose best?

A) sweep excess funds into Security account (SEC, SIPC rules)
B) sweep excess funds into Commodities account (CFTC rules)

Provided that he is a pure DayTrader (no holdings overnight), and trading 95% futures and seldom stocks or FX.

Reading the whole thread I become more and more inclined to select choice-B…..

Playing devil’s advocate: Say IB runs into the same problems as MF-Global, and needs cash to postpone/avoid bankruptcy. Then IB has two cash-pools: one of clients with non-segregated Securities accounts, and the other “pure”-segregated Commodities accounts. Would it then be much easier for IB to “lend” the money from the Security-account-pool? Especially as those accounts are assured by SIPC, and will not hurt the clients?

I really like to know what the above trader should select best: A or B.