I see that a lot of direct access brokerage firms (both small and big) are ditching independent clearing firms and moving toward self-clearing. What are the risks of having an account with a self-clearing firm? If a firm is corrupt, are there any measures that prevent them from running off with the clients money? Thanks, Frank
What list are you looking at? Most DAT firms have gone out of business....self clearing is a tough job and most do not have capital and manpower to do it
Yes, IB self-clears equities. Tradestation is also ditching Bear-stearns to go self clearing in the next 30 days.
Besides Tradestation, Terra Nova is also moving towards self-clearing by ditching Instinet clearing. Schonfeld Securities (a big proprietary and retail trading firm) is self clearing as well.
Shoney has been self clearing for a long time....TRAD and Terra are the only ones I heard of, although Im not so sure terra will do it..
The risks are in the balance sheet, reporting and risk management systems of the broker. I can speak for IB: Our group has one of the strongest balance sheets in the business with over 1.5 billion in capital and no debt. We have numerous safeguards in place to protect ourselves and all clients. (The main ones are that we require margin up front and will liquidate when an account violates maintenance levels). I'd also add that we get strong kudo's for the accuracy of our statements. The odds of a broker failing are very low. However, it does happen. Thus, in the end, you've got to do your homework by reading financial reports, checking the regulatory web sites and getting feedback from clients and then putting your money where you believe it is safe.
What a ridiculous comment. The risks associate with, and corruption that occurred at, Worldco had nothing to do with their being self-clearing. That's like saying that the risks of buying a stock in the milk producing sector are represented by Parmalot. The fraud at Parmalot had nothing to do with the sector they were in.
The fact that Worldco was self clearing did not have anything to do with the corruption there...you are absolutely right. But Fvicks questions were "What are the risks of having an account with a self-clearing firm? If a firm is corrupt, are there any measures that prevent them from running off with the clients money?" so I felt if he did a search on a self clearing firm that took the money and ran he would be all around better informed on certain risks. Now pipe down, I am just trying to help the guy/gal... cant believe I actually took time to IM you and help you with some Thompson analytics problems...