With the unfolding MF Global scandal where ordinary people lost money from client accounts you now need to ask yourself how safe is my money with a broker ? As far as I know unlike UK bank deposits where your first £85,000 is protected by the govt you have no such rights with any broker. If someone knows other wise I would be glad to know. Trading the markets is hazzardous enough without the additional worry of your cash going awol from your margin account.
Rhody Trader
Senior member
- Messages
- 2,620
- Likes
- 266
In the US, securities brokers have customer accounts covered by SIPC, which is similar to FDIC bank deposit insurance.
new_trader
Legendary member
- Messages
- 6,770
- Likes
- 1,656
I have yet to see anyone answer this question convincingly, however if you are buying shares outright (no margin) then technically there is no risk because the shares are yours, 100%. If you are buying on margin then you are hypothecating your stock to a broker and this could become a grey area in the event of a bankruptcy. Tha law in the US was clear - no commingling of funds, yet customers who owned bars of gold outright are being robbed by the trustee.
The trustee overseeing the liquidation of the failed brokerage has proposed dumping all remaining customer assets—gold, silver, cash, options, futures and commodities—into a single pool that would pay customers only 72% of the value of their holdings. In other words, while traders already may have paid the full price for delivery of specific bars of gold or silver—and hold “warehouse receipts” to prove it—they’ll have to forfeit 28% of the value.
I haven't kept up with this so there probably is an update. However my concern in the UK has been about buying shares via a nominee account where you are only the beneficial owner and the trustee is the registered owner.
The trustee overseeing the liquidation of the failed brokerage has proposed dumping all remaining customer assets—gold, silver, cash, options, futures and commodities—into a single pool that would pay customers only 72% of the value of their holdings. In other words, while traders already may have paid the full price for delivery of specific bars of gold or silver—and hold “warehouse receipts” to prove it—they’ll have to forfeit 28% of the value.
I haven't kept up with this so there probably is an update. However my concern in the UK has been about buying shares via a nominee account where you are only the beneficial owner and the trustee is the registered owner.
mightymayesy
Junior member
- Messages
- 31
- Likes
- 0
If Lehman can go bust...
I think you are confused between OTC and Exchange Traded Funds New_Trader.
: )
S.
I think you are confused between OTC and Exchange Traded Funds New_Trader.
: )
S.
new_trader
Legendary member
- Messages
- 6,770
- Likes
- 1,656
Confused where? I never mentioned either.
MajorDutch
Established member
- Messages
- 865
- Likes
- 87
personally I would never place more than 20% of my trading account with any 1 broker. I don't care if it's guaranteed or not, I need to sleep at night.
mightymayesy
Junior member
- Messages
- 31
- Likes
- 0
new_trader
Legendary member
- Messages
- 6,770
- Likes
- 1,656
Just saying what? I don't know what you are talking about. We are discussing brokers, where did I mention anything about ETF's or OTC's?
mightymayesy
Junior member
- Messages
- 31
- Likes
- 0
sigh, your monies security is dependant on where your trade/where your broker trades...
Exchange Traded Funds (i.e funds traded on an exchange) are guaranteed by a CCP. Not to be confused with an ETF. Obviously.
OTC transactions have increased counterpart risk as no CCP.
You were using this interchangeably and incorrectly and confusing yourself further by talking about custodians.
That is what I was saying.
S.
new_trader
Legendary member
- Messages
- 6,770
- Likes
- 1,656
Sigh.. I was talking about NOMINEE Broker accounts:
London Stock Exchange Nominee Accounts
Now, go ahead and amuse yourself with ETF's and OTC's again...
mightymayesy
Junior member
- Messages
- 31
- Likes
- 0
lol, a totally redundant point. Well done.
A nominee/assigned/designated account with a broker will not determine how it is traded and thus my point stands.
Back to Page 1 Chapter 1 for you I think... lol
S.
A nominee/assigned/designated account with a broker will not determine how it is traded and thus my point stands.
Back to Page 1 Chapter 1 for you I think... lol
S.
new_trader
Legendary member
- Messages
- 6,770
- Likes
- 1,656
I think I need to because I simply cannot fathom the conversation you are having with me. The question was: 'Re: Brokers...Is your money safe ?' and somehow, I don't know how, you are telling me I'm confusing ETF's with OTC's...from brokers...to ETF's...f*ck me...how did you do it? David Blaine has me guessing but this is a whole new kind of sleight of hand.
mightymayesy
Junior member
- Messages
- 31
- Likes
- 0
lol, agreed.
S.
S.
Mark Cookson
Newbie
- Messages
- 1
- Likes
- 0
you can kiss goodbye to your money/assets if you let your broker rehypothecate them. Christopher Elias at Reuters has been covering this for weeks. See MF Global Scandal : missing money | incomehedge.com and MF Global Once rehypothecated the assets have no investor protection.
new_trader
Legendary member
- Messages
- 6,770
- Likes
- 1,656
This video (although it is a bit of a vendor promo) explains what I was saying earlier. In the US, if your broker is the registered owner of the shares and you are the beneficial owner then it is known as “In street name”, whereas in the UK it is called a “Nominee” account.
In summary in order of safety, most to least:
1) If you are an investor and want absolute assurance your stocks are safe then you should take delivery of your stock/share certificates.
2) The next level is buying shares via a sponsored broker using a cash account ie/No margin.
3) Buying shares “In street name” or using a “Nominee Account” in a cash account.
4) Buying on margin.
I have read in numerous places that stocks held in nominee/street name accounts are segregated and ring fenced from a broker going bankrupt so the risks are considered hypothetical.
David Morgan EXCLUSIVE INTERVIEW with Tekoa Da Silva Protect Your Shares - YouTube
N.B: mightymayesy if you tell me I'm confusing ETF's with OTC's again you will get the cretin of the year award!
In summary in order of safety, most to least:
1) If you are an investor and want absolute assurance your stocks are safe then you should take delivery of your stock/share certificates.
2) The next level is buying shares via a sponsored broker using a cash account ie/No margin.
3) Buying shares “In street name” or using a “Nominee Account” in a cash account.
4) Buying on margin.
I have read in numerous places that stocks held in nominee/street name accounts are segregated and ring fenced from a broker going bankrupt so the risks are considered hypothetical.
David Morgan EXCLUSIVE INTERVIEW with Tekoa Da Silva Protect Your Shares - YouTube
N.B: mightymayesy if you tell me I'm confusing ETF's with OTC's again you will get the cretin of the year award!
mightymayesy
Junior member
- Messages
- 31
- Likes
- 0
