If you're a RefocFX account holder, there are several of us talking and discussing the situation. If you'd like to know what is going on (press releases, news stories, etc.), that will specifically effect RefcoFX account holders that is what this group is about. Also if there are legal options that become available to account holders it would be good possibly to act as a group. I just started this group on Yahoo since it's free and has a lot of utilities for sharing info among members: http://finance.groups.yahoo.com/group/refcofxaccountholders/ If you wish to subscribe to email directly just send an email to the following address: refcofxaccountholders-subscribe@yahoogroups.com
Just a reminder: I would recommend that RefcoFX account holders print out a current account report and file it. I'm sure you guys have taken care of this.
If you have a futures trading account, it takes more than just a broker bankruptcy to cause you a loss. The only way you can get whacked in a futures broker bankruptcy is if public customer funds are embezzled, or if other public customers have uncovered trading losses, larger than the broker's capital cushion in excess of customer deposits. If this happens, then all public customers will take a pro rata haircut, somewhere between 0% and 100%, whatever is required to cover whatever losses are not covered by consuming the broker's assets. If a futures broker does go bankrupt, it is very likely that this will happen, either because customer deposits are embezzled, or because customers have such large trading losses, that they blow out the broker's capital. Both of these problems happened at Refco futures, but bankruptcy was avoided by unlawfully concealing the deficit, transferring it to another entity, and then engaging in other fraudulent schemes. This coverup unravelled and sent most Refco entities into bankruptcy, but becaue the deficit was no longer on the Refco futures entity's books, the Refco futures entity did not go bankrupt and survives to this day. Consider opening a futures trading account at a Canadian broker, because the Canadians have deposit insurance which, unlike FDIC and SIPC, does cover futures trading accounts. Also consider using a broker, like Interactive Brokers, which has three levels of protection mostly not provided by other brokers. First, every night, any of your funds, in excess of futures margin requirements, are swept into a securities account for which you earn interest and receive SIPC coverage for up to $500,000 in securities and up to $100,000 in cash. Second, IB has much more rigorous risk control, and also has greater capital relative to its risk exposure, than do most other brokers, so it is less likely to bankrupt. Third, Interactive Brokers has a private insurance policy from Lloyds of London, giving you up to (I think very roughly) about $30 million in coverage, but the total payout for all customers combined is limited to $150 million, to be pro-rated if necessary. Maybe other futures brokers can provide competitive protections; do your research. Check the regulatory history of futures brokers with NFA and CFTC. If there is a history of failing to meet regulatory capital requirements, or of cooking the books, or of embezzling customer funds, as with Refco since they were fined for doing it repeatedly in 1994, then reject that broker. Look for a broker with an extra capital cushion and private insurance coverage to enable it to avoid or to mitigate bankruptcy. Extra capital is more important than private insurance coverage, because in a black swan market event, insurers may bankrupt and be unable to pay their promised coverage; but the broker's capital is money in the bank. You are quite correct to worry about fly-by-night brokers. I would definitely encourage you to worry. And don't even think about trading retail spot FX, except maybe at IB, if their insurance coverage applies (you should ask them).
I posted your PM, but I removed any information traceable to you, so you remain anonymous. Most of the answer to your question is addressed by my previous posting, in this thread, responding to Ripley. The rest is as follows. FDIC will provide absolutely no protection, whatsoever, against a bankruptcy at IB. IB wonât do this, but some brokers will open what is called a fiduciary account, at an FDIC-insured custodial bank, for which you are named, on the bankâs records, as the depositor, and your funds are separate from those of other customers. If such a broker bankrupted, then SIPC would automatically return ALL of your cash to you. If the custodial bank bankrupted, then you would enjoy the full benefit of FDIC coverage. FDIC coverage is superior to that of SIPC, because FDIC is backed by the full faith and credit of the federal government, but SIPC is backed only by less than $2 billion dollars, so if this amount is exhausted, SIPC would leave you naked, unless Congress acted to replenish SIPC; and in a financial crisis, Congress might find itself unable to do so. SIPC, and IBâs Lloydâs of London policy, as discussed in my response to Ripley, will partially protect you in the event of IB bankrupting. If IB, or any other broker goes bankrupt, then any cash or property marked, in its records, as âcustomer propertyâ, but not specifically segregated and tagged to one particular customer, would be divided between all the customers on a pro rata basis, to the extent possible to satisfy any deficit owed to them as a result of a bankruptcy. This is an important benefit to customers, because it gives them a preference, in bankruptcy proceedings, over other creditors in regard to âcustomer propertyâ. If, however, cash or property is marked specifically as belonging to a specific customer, then, instead of a pro-rata disrtibution, that property will be returned to its specific customer-owner (as described for cash above). This would be an even stronger preference in bankruptcy. IB doesnât hold customer property in this way. IB holds securities in âstreet nameâ, meaning that IB records itself as the legal owner, and maintains internal records as to how many of its stock shares, for the same stock, belong to each different customer. Most brokers will hold securities in âstreet nameâ, at least if those securities are in a margin account. If you want to maximize your protection againt broker bankruptcy, you need to find a broker who will NOT hold your securities in âstreet nameâ, because âstreet nameâ ownership results in a pro-rata distribution, which is less favorable to you than simply getting back all of your shares. IB doesnât use fiduciary accounts, and it holds securities in âstreet nameâ, so if IB bankrupts, you will first enjoy the benefits of SIPC coverage, and IBâs Lloydâs coverage, and then, if you are still not made whole, you and the other jilted customers will receive a pro-rata distribution of whatever customer property is available to satisfy the deficit. If this is not sufficient, then you would have to get in line with the other general unsecured creditors in bankruptcy. Protection for securities accounts is much stronger than it is for futures accounts. Protection for spot retail FX accounts, other than at IB, is non-existent. This is why Refco FX account holders canât get their money back.
My opinion: T-bills won't protect you against futures broker bankruptcy. If the broker bankrupts, with uncovered public customer losses due to trading or embezzlement, then your T-bills will be sold, and the proceeds thrown into the kitty for pro-rata distribution to all public customers, so that all public customers share equally in the loss. T-bills won't help you avoid the pro-rata distribution. See http://www.cme.com/clearing/set/fs/finsafsys10241.html. But I think that you are correct that diversifying your credit risks, by spreading your assets across multiple brokers, reduces your risks.