sorry to ask the obvious but I just want to double check on the broker insurance. Most claim to be SIPC insured, but what if someone has more than $ 500.000 in cash what would happen if the boker goes belly up ? ( Etrade / etfc ) does not look pretty in 2008. It might be an unlikely scenario, but after the collapse of Bear Stearn I would like to know if other traders are comfortable in keeping a large sum of money with their broker. Thank You
All broker-dealers have to belong to SIPC. Only $100,000 in cash is covered by SIPC. Use a well capitalized broker that doesn't have risky customers.
Nowdays things can get crazy so before thinking about all the money I could make by trading I think about keeping safe what I have. It seems that the vast majority of brokers if they go bankrupt will cover your cash up to $ 200.000 At this point I wonder if FDIC insurance is additional to the SPIC insurance, if that is the case, any normal broker with the basic insurances should cover your account up to $ 200.000 in cash ...$ 100.000/FDIC + $ 100.000/SPIC, right ? About my broker, I called ETRADE they give me two options. 1) Just like you said FDIC up to $ 100.000 cash and a nice interest on the cash sitting in your account in my case 2.5% 2) Very little interest for the cash sitting in the account 0.3% and FDIC insurance up to $ 500.000 with their ESDA account feature. esda stands for extended insurance sweep deposit account and from their website: " Product Description ESDA is a bank deposit account at our affiliate, E*TRADE Bank and additional deposit accounts at up to four other banks. This allows FDIC insurance coverage up to $500,000. It is not a money market fund. " Your uninvested cash will go back and forth between your account and the banks they work with. Basically they will give a higher FDIC cash coverage as long as they can use/borrow your cash for peanuts. I am not complaning but generally speaking it is obvious that banks are not your friend, ever.