The Shocking Truth about 'Segregated' Accounts

Discussion in 'Trading' started by Joovenile Jatt, Nov 3, 2011.

  1. Seg accounts just give you the priveledge of having yr money stolen last. In the event of a FCM defaulting yr money is gone. They will pay off the banks first and other big creditors, using yr money to do so if needed. This 700m missing from MF accounts? Who is going to re-imburse this? The govt? Warren Buffet? Some charity that has a soft spot for traders? ITS GONEEEEEEE! When you place yr cash with an FCM look at it like this, you are buying shares in that FCM. If the company goes bust the shares go to zero and yr money goes to zero with it.

    Always surprises me how traders dont take the choice of who they clear through seriously. Most don't even read the contract they sign ... have a look at the smallprint one day ... that'll give you a shock!
  2. TILT2


    Sarcastically speaking, MF Global is a registered member of NFA(US)/FSA(UK), probably it's no different from any other brokers that we are using right now.
  3. leerees


    I withdrew my whole account from MF Global about 3 months ago as I'm 100% forex now days. When I was actively trading shares I'd withdraw profits monthly.

    I downgraded my touch pro platform to avoid the monthly charges but never closed my account.

    I just noticed I actually owe MF Global for 1 month of touch pro access, well being as they're going bust and haven't asked for the money :)

    Although I'm one of the lucky ones this certainly has been a wakeup call. Diversify your funds amoungst brokers because you never know what's around the corner.
  4. Telling that to people who lost with MFG isn't going to make them feel any better. Show some sympathy? I still think somehow someday some of the $$$ will be returned to them.

    The rest of us took out a lesson from this, and maybe some of us will use different brokers for different accounts, just to spread the load.
  5. bone

    bone ET Sponsor

    Agreed. The OP, while he may not necessarily be gloating, knows damn well that MF has always been considered one of the stronger independent FCMs. Maybe he can share who he clears...

    I mean, honestly, look at REFCO - if you are a client there is an element of luck involved.

    OP - you started a naive and stupid post born of ignorance. Incredibly misplaced cynicism.

  6. The only stupid one here is you and the fact that you come here begging for business as a 'spreadprofessor' proves it. Take your begging bowl elsewhere and stop talking your own book.
  7. benwm


    I use two brokers with the majority of funds in IB.

    But IB is not risk free either:-
    1) IB trades their own account, just like the MF. In a perfect world I guess they would just be sticking to the broker business, but I suppose they would argue that they make money on the prop side so that makes them stronger, diversifying the business, etc..

    2) Any broker has to park its funds <i>somewhere</i> and there will always be temptation to take some risk to get a little extra in yield. How many of us are happy with 0.50% on our savings? Not many. A responsible broker will steer clear of obvious dangers, but any EU sovereign debt has until the last year or so been considered near risk free . Even MF Global made the choice not to invest in Greek bonds, they invested in Italian short term debt, and a default is still not the most likely scenario for Italy at this stage. As alluded to by others, it was the size of their repo book, not just their European sovereign bond position that caused the problems. How is the ordinary trader supposed to know about the size of their repo book?

    I would like to get a better understanding of the CFTC publically available data on capital etc to guide me away from future risks. Some kind of ratio in the form of excess capital / risk to have an idea of how safe that broker is.

    And ideally I would like half of my capital with brokers that do not trade their own account. It would be useful to have a list put together...

    There were warning signs to say, "close your account" in the last couple of weeks, last week certainly, but if I'm honest I was really wanting to open an MF Global account a few months ago because of their extensive range of markets offered (inc Asia) - the only reason I didn't was because their commissions were not competitive. I don't know for certain that I would have closed the account in time.
  8. bone

    bone ET Sponsor

    The United States jurisdiction registered clients will be made whole, the balance are likely SOL. Same as REFCO and the others.
  9. benwm


    European accounts?
  10. bone

    bone ET Sponsor

    Right now, CME clearing is saying that there is an 11.6 % funding deficiency ( as of the overnight November 02 into 03 settlement ).

    The US CFTC has already stepped in mandated funds transfers into segregated customer accounts before any other funds transfers are permitted. A bankruptcy judge on Wednesday just allowed a trustee to transfer certain customer accounts to about 5 other FCMs. In other words, US clients with segregated accounts are first in queue, and the 11.6 % funding deficit shouldn't materially affect them.

    I personally went through this in the late '90's with Griffin Trading. I got my money back. The European clients got hosed. The US CFTC covers US Citizens first and foremost.
    #10     Nov 3, 2011