Where is my money protected

Discussion in 'Retail Brokers' started by investwthme, Mar 9, 2009.

  1. Ok, money is safe. Most fcm hold your cash in a separate bank account and +/- your trading profits to that account at oed.
    I didn't ask how much but I am assuming that it's insured to the max fdic will cover
    #11     Mar 18, 2009
  2. chartman


    There is NO protection for cash held by a FCM in a commodity futures account. Your funds are only as safe as the FCM. The Exchanges clearing houses have a fund to protect customer assets held by the clearing house. But most funds held by FCMs are not on deposit with the clearing houses. If the FCM is a member of SIPC, you may have protection of up to $100,000 for cash depending on how the account is setup. SIPC covers only security accounts.
    #12     Mar 19, 2009
  3. "insured" does not mean nearly what people think.

    The safety of Futures, is that your funds are SEGREGATED, nad kept at a bank (usually Harris, in Chicago).

    When brokers go belly up, non-futures funds were treated as part of the firm's assets, and were frozen and lost. Go read what happened to Refco customers. Their Futures customers made out the best.

    And the SIPC insurance may not be quite the protection you think.
    #13     Mar 19, 2009
  4. chartman


    I didn't ask how much but I am assuming that it's insured to the max fdic will cover

    NO. You, the customer, do not have an account with the bank. The account is in the name of the FCM. Their account has the FDIC protection. They have one customer account for segregated customer funds not currently obligated as margin. Your 'free' cash balance is commingled with all their other customer's free cash balances into one account. The segregation is a bookkeeping entry. If you have an open futures contract, funds are removed from the segregated customer 'free' cash account to either their customer margin account or deposited with the clearing house to cover any imbalance in open contracts. A FCM only deposits funds with the clearing house when they have an imbalance between open buy and sell contracts. Funds on deposit with a FCM has no governmental protection for the customer unless the free funds are in a security account and the FCM is a member of SIPC.
    #14     Mar 19, 2009
  5. VinnyB


    Sorry about the redundancy here, but I'm blown away by what I just read and had to comment. Been with TD, and Tradestation in the past and assumed that money was SIPC covered at both. Well, it is at TD and guessing that the securities account was also at TS.

    Been looking into OEC, AMP or Mirus and never considered them going belly up.

    So...everyone here trading futures is prepared to lose $100k/200k/plus through firm failure? I know it's a dumb question but just thought there would be more dialogue.

    My stake is only $50k. Can't really break that up to more than two brokers.

    Am I missing something?

    #15     Mar 23, 2009
  6. Tradestation futures clears through FCM R.J. OBrien and it is possible that a FCM could go down and not the brokerage so in a case like this one would have to consider both the brokerage and the FCM I suppose. In the case of OBrien, they've been around since bout 1914 so I would guess they're as safe as any.
    #16     Mar 23, 2009
  7. chartman


    Only a FCM can accept deposits. FCMs that clears for introducing brokers will be the only firm holding funds.
    #17     Mar 23, 2009
  8. What you are missing is that if a FCM or clearing firm goes under you will not lose all the money in your account.

    In the past when FCMs or clearing firms have gone under another firm steps in and takes over the customer accounts and makes the customers whole.

    If for some reason no other firm wants to take over the failed brokers accounts, then a liquidation will take place. In a liquidation the customers will get back a significant percentage of their account balances, but just not 100%.
    #18     Mar 23, 2009
  9. VinnyB


    Thanks Jeb.

    That is a pretty big point to miss :p


    #19     Mar 23, 2009