http://www.rjobrien.com/Docs/Sentinel Client Letter Aug 2007-Website.pdf Tradestation clears futures trades through RJO.
If you fund your account with T-bills, does that mean you are safe regardless of how many of these money market fund firm goes bankrupt?
No, you are not safe. If your clearing futures broker bankrupts, and is unable to cover customer trading losses or to replace customer property embezzled by its own employees or lost by negligent money management, etc., then your T-Bills will be liquidated and the proceeds will be used to cover the deficit, and if anything is left, you and the other customers will get a pro-rated refund. Which means you can lose part or all of your futures account, even though you funded it with T-bills. This is due to U.S. law.
Rockford is correct, except for one point... The broker and/or FCM does not cover customer trading losses. What Im sure Rockford meant to say is to cover margin requirements. Remember the movie Trading Places? The Dukes received a margin call for a position worth less than the required margin. Although the movie took place in the early 80's, the concept and the rules have not changed. It is this same concept that forms the basis of the naysayers argument against low intraday margins. Osorico
If some of your fellow customers, in the same pool at the same futures broker, have uncovered trading losses, then the futures broker is legally required to make good on those losses. The broker does not reimburse customers for their own losses, but the broker must provide the funds needed so that the counterparties to those losing trades receive the winnings to which they are entitled. This is what I meant when I said that the FCM must cover uncovered customer trading losses. If the FCM cannot do this, then the assets of other customers will be liquidated and used to cover the deficit generated by the uncovered trading losses, and then the other customers will get only a pro-rated refund of what is left.
Nono! I understand if the futures firm goes bankrupt, the t-bills is in trouble. I am just asking if you fund your account with t-bills, does that mean the process of your broker placing your money in a money market fund firm like Sentinal does not include you? I am just wondering if they take a 15% haircut on the money market fund, does it mean it only take a 15% haircut on cash balance and not t-bills?
Who is a reliable future's clearing firm? What are the chances of a firm like RJO going under in case of a say market crash? thanks
http://www.cftc.gov/marketreports/financialdataforfcms/index.htm the higher the net capital and excess capital, the better. looks like Sentinel only had $3.3m of net capital before it blew up.
To rockford, since I know he is big on IB: IB's universal account protection of up to 30MM, that means all funds swept into the universal account from whatever you trade is covered by their SIPC insurance coverage, right? BTW What were the chances of a large firm like Refco going under in a good market?