I'm going to go a step further here. Futures traders have been told since the beginning of trading time, that "segregated funds" meant that our funds were protected from the brokerage firm being able to spend our funds on its own business. Now, we find out, quite contrary to that, the brokerage firms are placing our 'segregated funds' at risk to use in their own business. It was hidden in legaleze type language that almost nobody realized, that allowed them to simply borrow against our 'segregated funds' and do with the proceeds whatever they wished. Seeing as how almost everyone was relying on the impression being given that our funds were 'set apart and safe' when it was no so and hidden (to most everybody), i see no alternative other than to call it a great big fraud and scam. Defend this practice of rehypothecation of 'segregated funds' if you can.
I am thankful that you and IB-AN have made in depth replies to the issues at hand and they have alleviated some of my concerns. But you and senior managment at IB should also be aware that the financial world is now different after the MF Global failure. Trust is gone and any firm that is not too big too fail is vulnerable. If IB's stock price were to ever drop into single digits or have a sudden big one day decline for ANY reason, people are going to panic and start pulling out funds. I hope you guys are prepared for this scenario.
Once again, you are attempting to convince us that "even though we have access to your segregated funds by borrowing against them, would never, ever do anything to cause you to lose them. Trust us." If you really wanted us to trust you, you would have made it explicit and up front from the beginning that you had access to our funds by borrowing against them. I suppose right about now you are saying to yourself "why didn't he read the contract?" Well, seeing as how virtually no-one that i know of in the trading community knew what rehypothecation was or the risks it inflicted upon us, I would say that "why didn't you read the contract" is a pretty flimsy argument. Especially since everyone in the industry HAS been relying on the term "segregated funds".
Will the SIPC cover 100% of all loses for cash & stock, even stock purchased on margin, up to $250k thru IB?
Any business model that allows the firm to at anytime "play around" with customers funds is a broken model in my opinion. Run away from that model and fast.
As an IB client, I appreciate def and IB-AN's responses. But perhaps the better question one or both of you can answer (to keep things really simple) is: What is the difference between re-hypothecation, which as you have admitted IB does engage in, and what MF Global did that ended up losing their clients' funds? Is the difference between what IB does and what MF did simply the degree to which MF Global was levered up? Or were the MF Global losses not a result of re-hypothecation, but something else?
Mike, I am with IB... and a LOT of my friends are with IB and we are not feeling secure... and we are NOT happy with these answers... We appreciate you aggressively 'going' after the truth here... thank you... I hope the rest of IB-AN's will join in ... 'Full Boat'... until we get EXACT clarification... IB is missing the Gold at the End of The Rainbow here... If they were to become the ONLY Brokerage Firm to Halt ReCrap... their Biz and customers could grow exponentialy over the next few years... Wake up IB and smell the Defaults...
Now you mention gold you have my full attention o.t cannot re-hypo gold can you. there is one simple step that IBKR could take to make it feel safer and grow customer base exponentially, that is to allow optional Direct Registration of shares. Then in event of black swan event it should be easier to see what belongs to who. Or in the unlikely event something sinister is up, alarm bells will ring at the Registrar if there is a massive change from client name back to street name. Now will IBKR allow Direct Registration or not? if not what is the excuse for not doing it? That is the question.
What are the chances right now that those that lost money in the MF scandal will never see their money back? Based on the things Ive read, it's looking pretty grey but Im not up to date on the topic. This would be very sad, to lose money like that, very sad Fon