Novice question about broker & customer protection

Discussion in 'Trading' started by scalpmaster, Aug 2, 2007.

  1. When I invest in stocks for long term through an
    U.S online broker, are there documents that
    show I actually own the stocks or are they only virtual
    agreement just like contract for difference (CFDs)?

    If the broker bankrupts, do I just get cash back based
    on liquidation at current market price, or do I still
    physically own the stocks with a choice to sell them later
    (If so, how can I transfer them to another broker) ?
  2. is there a central system that keep tracks
    of the number of stocks that really exists for any
    company or different brokers can just float
    any amount for transaction?
  3. Do a GOOG search on stock "Clearing Corporations". Clearing houses, which are separate from brokers and exchanges, handle these tasks. Brokers just pass on the trade info.

    At least, that's the way I think it's handled... :)
  4. your clearing corporation actually domiciles your money. If they go belly up, you have SIPC, securities Investors Protection Corp, and probably private insurance they buy to attract big money. sipc is 100 cash, 500 securities.

    Your clearing corp, you can have a BD who transacts your business for you, has an omnibus account at DTCC, CEDE corp. If all his customers have 1mm shares, that i swhat shows at CEDE. If you sell 1000 shares of XYZ, and I buy it, it is swapped out at DTCC with your broker reflecting it for you. That is how it's supposed to work.

    As far as authorized issuance, clearing, etc. don't get me started. Go to Yahoo. It's easy to find holdings of companies = to 130% of the float.
  5. If the clearing house/corp. is the one having
    all the info of what stocks I own, can I buy stocks from,
    let's say IB, and sell them through another broker
  6. ACATS - US
    Customers can transfer US stocks, options and cash held at another brokerage firm to IB through the National Securities Clearing Corporation's (NSCC) Automated Customer Account Transfer Service (ACATS). Requests for ACATs are made through Account Management.

    IB accepts full and partial transfers of assets. Please note that IB only accepts products that are available for trading. Certain products, such as Mutual Funds and Limited Partnership units cannot be held in your Interactive Brokers account. For initial account funding, your transfer must meet our Minimum Initial Deposit requirements or the transfer will be rejected. Under normal circumstances, the transfer will take between four and eight business days. Please note that you will not be able to withdraw any funds or transfer any assets to another broker for ten business days after an account transfer is received. To transfer assets, go to Account Management and select Deposits and Transfers.

    If you would like to transfer cash only, we encourage you to electronically transfer funds from your current broker in order to expedite transfer.

    Please note that according to ACATS protocol, standard transfers are always initiated on the receiving end, and therefore we do not initiate transfers out from IB to another broker. View FAQs on ACATS.

    As is industry practice, we will not transfer options during their week of expiration.
  7. SEC keeps track of all of that. Also, the exchages themselves should know what transactions are happening. You know NYSE, Nasdaq, Amex, etc..etc.

    Always check the credenials of the broker.

    But, if you go with Interactive Brokers, MB Trading, or other wide known names then you should be fine.