Is anyone using Custodian service to protect your account? | Forex Factory

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Is anyone using Custodian service to protect your account?

  • #1
  • First Post: Aug 27, 2017 9:27am Aug 27, 2017 9:27am
In recent years, unexpected incidents such as the upeg of CHF pairs by Swiss National Bank had created catastrophic losses throughout the financial market especially FX industry.
These losses have caused quite a number of FX brokers to become insolvent and shut down subsequently.

I noticed that many of the fx brokers in the market do not have custodian.
(Custodian is a financial institution that holds customers' money for safekeeping in order to minimize the risk of their theft or loss)

So my questions are:
How do you guys (retail traders/investors) go about this concern ?
Do you guys subscribe to some sort of custodian service OR custodial account ? If yes, do you mind to share your experience here?

Thank you.
  • #2
  • Aug 28, 2017 12:07am Aug 28, 2017 12:07am
hi judy.........
have never heard of a custodian service which holds client`s money from brokers.

are you not confused with custodian services holding company stock/shares for broker`s clients?
  • #3
  • Aug 28, 2017 12:17am Aug 28, 2017 12:17am
Quoting judysfriend
In recent years, unexpected incidents such as the upeg of CHF pairs by Swiss National Bank had created catastrophic losses throughout the financial market especially FX industry. These losses have caused quite a number of FX brokers to become insolvent and shut down subsequently. I noticed that many of the fx brokers in the market do not have custodian. (Custodian is a financial institution that holds customers' money for safekeeping in order to minimize the risk of their theft or loss) So my questions are: How do you guys (retail traders/investors)...
I have no experience with this kind of service too! But can you explain more please? For the reason that, it looks too much interesting!
  • #4
  • Aug 28, 2017 12:35am Aug 28, 2017 12:35am
if you`re worried about theft or insolvency of the broker, why dont you join a broker who is regulated and has a government guarantee in case something happens.
the British government guarantees 50,000 GBP - the Canadian government 1,000,000 CAD - the European authorities ............? Euro.

living in New Zealand, I would never join a NZ broker or even an Australian broker, because there`s no government guarantee in NZ nor in Aus.

I do have accounts with 3 British brokers just for their regulation and government guarantee.
  • #5
  • Edited 1:15am Aug 28, 2017 12:51am | Edited 1:15am
Quoting judysfriend
In recent years, unexpected incidents such as the upeg of CHF pairs by Swiss National Bank had created catastrophic losses throughout the financial market especially FX industry. These losses have caused quite a number of FX brokers to become insolvent and shut down subsequently. I noticed that many of the fx brokers in the market do not have custodian. (Custodian is a financial institution that holds customers' money for safekeeping in order to minimize the risk of their theft or loss) So my questions are: How do you guys (retail traders/investors)...
Under Australian regulation Custodians/ or Trustees/ Responsible Entities...... hold assets (physical or records) on behalf of a group of investors (who have underlying rights to them) and arrange for their safe transfer to other Custodians or the Investor direct arising from settlement or withdrawal/deposit instructions passed to them by an Investment Manager or Fund Administrator who operates in accordance with the mandate exercised by the Responsible Entity. A relationship exists between the Custodian and Fund Administrator to track individual investor entitlements such as unit value etc.

Brokers are separated from this arrangement given a potential conflict of interest between the parties and simply arrange for the execution of the bulk trading instructions given by the Investment Manager on behalf of the Custodian.

For us retail traders who own, administer and hold the assets (or records) ourselves, there is no requirement for a Custodian to be involved. The regulatory structure is used simply to protect pooled investments. We are the Custodian, Administration manager and the Investment Manager all tied up in one and arrange for the execution of our trades directly with a broker.

Custodians can be used to hold assets on behalf of individuals and may have more bargaining power than us with brokers during disputes due to their asset backing and size...which is the only real advantage of using them if a dispute arises.....but by using them you need to chip away about 0.2% of NAV or more for small sums from your already very fine edge or negative sum game from retail trading to pay for this benefit. On the other hand if you were ultra wealthy and ate chocolate covered lobsters....well that may be a different story. :-)
  • #6
  • Aug 29, 2017 12:15pm Aug 29, 2017 12:15pm
Quoting NeilWagner
{quote} I have no experience with this kind of service too! But can you explain more please? For the reason that, it looks too much interesting!
Hi NeiWagner, me neither. But you can read more in these links.
http://www.goforex.eu/forex-trading-...dian-services/
https://www.soloforex.com/protect-fo...etana-custody/



Quoting yonnie
if you`re worried about theft or insolvency of the broker, why dont you join a broker who is regulated and has a government guarantee in case something happens. the British government guarantees 50,000 GBP - the Canadian government 1,000,000 CAD - the European authorities ............? Euro. living in New Zealand, I would never join a NZ broker or even an Australian broker, because there`s no government guarantee in NZ nor in Aus. I do have accounts with 3 British brokers just for their regulation and government guarantee.
That's what i am looking at currently.
You're right. Some governments or national banks do guarantee to certain amount of the deposit.
And some brokers actually have custodian service if your account size hits a certain amount.



Quoting Copernicus
{quote} Under Australian regulation Custodians/ or Trustees/ Responsible Entities...... hold assets (physical or records) on behalf of a group of investors (who have underlying rights to them) and arrange for their safe transfer to other Custodians or the Investor direct arising from settlement or withdrawal/deposit instructions passed to them by an Investment Manager or Fund Administrator who operates in accordance with the mandate exercised by the Responsible Entity. A relationship exists between the Custodian and Fund Administrator to track individual...
Arr thanks for the info, Copernicus!
Some brokers claim that our deposits are segregated and maintained separately from the brokers' own funds...our deposits can only be withdrawn as a direct result of our trading-related activities or withdrawal requests...no withdrawals can be made from this account for any brokers' operations...I'm not sure though if this could protect our money in the event of brokers' insolvency/bankruptcy...
  • #7
  • Aug 29, 2017 1:48pm Aug 29, 2017 1:48pm
I think the best solution is just to find a broker with a high amount of leverage, keep only what you need to trade with in your account, regularly withdraw profits and keep the rest of your trading funds in an FDIC insured bank account. Problem solved. That way 90% of your trading account is protected.
  • #8
  • Aug 30, 2017 10:33am Aug 30, 2017 10:33am
Quoting Madinvestor
I think the best solution is just to find a broker with a high amount of leverage, keep only what you need to trade with in your account, regularly withdraw profits and keep the rest of your trading funds in an FDIC insured bank account. Problem solved. That way 90% of your trading account is protected.
yup that works too if you only intend to trade within a certain volume/contract size
  • #9
  • Aug 30, 2017 4:33pm Aug 30, 2017 4:33pm
Quoting Madinvestor
I think the best solution is just to find a broker with a high amount of leverage, keep only what you need to trade with in your account, regularly withdraw profits and keep the rest of your trading funds in an FDIC insured bank account. Problem solved. That way 90% of your trading account is protected.
your "best" solution is for traders, who are not allowed to join a government guarantee scheme, like the US traders.
for everybody else the best solution is to open an account with a broker under a government guarantee scheme:
funds 100% protected and no extra work with depositing and withdrawing of funds.
  • #10
  • Last Post: Aug 30, 2017 7:08pm Aug 30, 2017 7:08pm
Quoting yonnie
{quote}a government guarantee scheme.
Lol, that's hilarious, but true.
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