SIPC How secure is your broker ?

Discussion in 'Retail Brokers' started by guy990opl, Aug 5, 2008.

  1. 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
  2. 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.
  3. 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.