Mitigating the Risk of Using Only One Direct Access Firm

Discussion in 'Retail Brokers' started by NickPhil, Feb 25, 2007.

  1. NickPhil


    I’m using IB since 2002 and I am quite satisfied. Although I consider myself primarily as a value investor and not as a Trader I average 20-30 trades per week. TWS is a fantastic platform and the feeling of being able to trade almost every world market is unique.

    My account is increasing in size since we are on equity and commodity bull market and I employ more funds to IB (which are withdrawn from by bank brokerage firm).

    Since the amount in the direct access firm is increasing I consider that it would be prudent to mitigate the risk by having a second direct access broker. I would expect that in the future IB would provide full account fraud protection as E-Trade and probably other firms do, but for the time being it seems not to be in their plans.

    What are your thoughts on that and which direct access firm would you suggest as “supplementary” to IB?

  2. nick ... you can ask for a "security token" from IB

    however if your concerned about being able to hedge
    some "open positions" in volatile market conditions
    if your IB connection was "down" for any length of time
    then you need to open up at least one other
    brokerage acct elsewhere

    good luck ...
  3. NickPhil


    Thanks for the reply SethArb.

    I use already the IB’s "security token". For sure it provides me more confidence. However, it doesn’t provide 100% protection (for instance to doesn’t protect you form the “pump and dump fraud”).

    There are solutions to milden the problem and expressing our concerns sooner or letter IB will deal with this issue.

    In the meantime it is not a comfortable feeling to have all eggs in one bag.
  4. Which types of stocks/contracts do you trade, and which non-US markets? Few brokers have the breadth that IB has, but if you give us some idea of what you trade, people can make some recommendations.
  5. mw_401


    Can you explain that type of fraud so that I can check whether I am covered?
  6. NickPhil


    The “Run and bump fraud” happens when your trading account is hijacked and the process to withdrawal your money from your account is blocked. In this occasion they use your account to bump a low volume stock or warrant which they can sell in significant higher prices (by using their own account).

    Loufan, I intent to use IB for trading the international equity markets.
    The second brokerage firm will be used for the US market only (again equity).

    ie I’d like to have your suggestions for a dissent direct access firm which will be used to trade US shares only.
  7. Although I don't have experience with them, ThinkOrSwim has gotten good ratings by others here. (I trade at IB and at some non-direct-access brokers.)