US Traders Must Move their Funds and Accounts to Europe.

Discussion in 'Trading' started by PocketChange, Jul 10, 2012.

  1. Just a common sense assessment weighing the Pro's and Con's of keeping any accounts open with US Brokers/Dealers versus European Banks.

    #1. US Segregated Accounts versus EU Named Accounts

    In EU your funds are held in Bank Accounts under your name.
    If the Bank Blows out you have depository insurance similar to FDIC.

    In US your funds are simply a journal entry on the books and records of your broker/Dealer. The exposure is real, recovery limited and the controls / regulators are a farce.

    #2. Examining Authority.

    In EU: Based on Country of Legal Entity.

    #3. Cross Margin relief / Haircut Models

    In EU: Negotiated based on risk. COH Model.
    In US: Limited to OCC approved instruments.

    I'm sure others can add to the list but #1 is most relevant.

    Would you give a bookie $100K to hold on their word saying your money is safe and they won't gamble with it? Would you give a crack whore your stash to hold on their promise they won't touch any of it?

    At minimum every US fiduciary that holds any client funds what so ever should be required by law to maintain a surety bond equal to 110% of the value of deposits and assets marked to market everyday. A penalty of treble damages and fees for any breach.

    I would have much higher confidence knowing I would be able to file an insurance claim and get my recovery in 30 - 90 days and let the insurer with their army of attorneys fight the fight to recover funds and prosecute them both criminally and civilly.

    Reality is with FATCA some of these doors are closing fast.
  2. ForAPlus


    Can you imagine what kind of fees/negative-interest rate your broker will charge your balance if this is true??

  3. Zero.. it's their cost of doing business. I'm sure AIG will underwrite and monitor. Should be along the same line as General Liability insurance. Except an insurer who is underwriting the risk will do a much better job monitoring them then our regulators.

    Fidelity / Surety Bonds are common in contracts to assure performance.

  4. ForAPlus


    Cost of doing business = passed on to you, especially when that cost is directly related to your account size;

    Second, while I suppose it's nice if an AAA-rated insurance co is underwriting the custodian risk, what happens if broker goes for the lowest-possible rated insurer allowed by reg/contract/whatever?

    Do you really feel better if a B- rated Vincenzo's Staten Island Surety is underwriting your account? Is that better than SIPC?

    Think your idea is a little half baked there...

  5. Won't work for FX brokers, thanks to Tweedledee and Tweedlefairy (Dodd/Frank).