I think we -- customers of IB -- all appreciate the time and effort you have devoted to clearing up any concerns some have had. If you look back at me posts, you will see I was not concerned because the overwhelming portion of my IB account (except for some minor long term spreads) is SIPC guaranteed. But I do want to take issue with the very first thing you have used to reassure your clients. The reason I take issue with it is that you know in terms of segregated futures' funds what you have said is far from the whole story and is there to reassure rather than inform. As you well know your firm or any other firm even when they are in strict compliance with every statute and rule still exposes your clients to some small -- tiny in IB's case -- risk because of the absurd nature of segregation as a concept. You well know that futures' client funds are segregated as a class -- not individually -- and nothing inures that class (and hence the individuals that comprise it) from losing all or part of those funds through a variety of mishaps, sloppines (Lehman Brothers London debacle) and simple fraud at even a lower level than Sr. mgm't. Please understand I am a huge fan of IB. Your strict margin requirements -- while a huge pain in the ass -- provide one mighty firewall protecting those seg funds and the pt 30 deposits as well. You guys clearly put an emphasis on security and internal controls. I think if, as and when it hits the fan you are among those that come out the other side in great shape. I have no quibble with your firm except that I think you are wrong to gloss over that the statutes and regs systemically builds in risk. You guys have real muscle to back up your financial and counter part obligations. You can, and should, let your clients and everyone else know what a piece of crap the system and its regs really are. If you do, almost every futures trader with a brain will opt to "bank" with you even if they keep "small" money elsewhere to take advantage of the $500 RTH margins in the minis at other firms (I trade ES and I do it) and the reduced margins on other instruments. Since you are guys are well positioned for the storm you need not be afraid to let people know that the system is quite poorly positioned and in the case of some clearing firms with many IB's grafted on to them downright rickety. Again, just to be clear I have great respect for and confidence in your firm. I believe it is built to endure stress and ultimately stay the course.
If the broker hypothecates securities vs. cash (e.g. stock loan or bank loan) the funds must be returned to the segregated reserve account. If they are hypothecated to a clearinghouse as margin collateral, they are maintained in a customer account at the clearinghouse.
That is correct. CTS T4 is licensed via many other brokers and clearing firms as well but I find some advantages in having Cunningham themselves as the broker and clearing firm. Since they do not want to compete with the other brokers and clearing firms they license T4 to, they do not advertise their own clearing firm and brokerage much, if at all.
I wouldn't trust any firm right now. Like they would tell you they are on the wrong side of a bad trade with your money. Of course they are going to tell you everything is fine until it's not. The markets really didn't buy into Europe's "fix". I don't see countries giving up their soverignty. Might sound nice on paper. Imagine Canada trying to tell us how to run our house. Yeah right. With all fuss about German dominance I certainly don't see countries bowing to Germany's demands. I just don't see it happening. I think theres gonna be another attempt to push yields higher. If yields start to blow I would be wiring money out asap. NO checks. wire only. Better safe than sorry. I would go further and then move the money to a different account because if shit hits the fan they may try to retrieve it only to give you X cents on the dollar back. I think I'm going to stick to options for awhile until we get some clarity. There was a good article on Cnbc about herd behavior regarding banks and how they all take the same trades/risk to become "to big to fail" as a whole. You don't want to stray from the pack or they will let you go under. It really doesn't apply to the MF's out there for the most part but if the same trade/risk herd mentaility is the same there may be another MF looming out there.
Most of ib's assets are options and to my knowledge there is no margin hypothecation or re hypothecation with a majority of assets on their book.
Sorry, not good enough. MF "clawed back" money that was wired out prior to bankruptcy from some customers. Just another of those things we didn't know was possible.
Good Grief! Nobody here is getting upset about hypothecation! It's RE-hypothecation that we've just learned about. And you, who are asking us if we even know what hypothecation is, apparently don't know the difference! Good grief!
It looks as if, despite the Reuters article, the normal meaning of re-hypothecation is just hypothecation involving a third party lender as well as the customer and the broker. So they do amount to essentially the same thing in the way IB or most brokers operate.