How safe is our money at the brokers?

Hi,

As you may heard, Icesave, a bank from Iceland has gone bankrupt. I had a savingaccount at Icesave and in holland (where I am from) the government guarantees that customers will get their money back from 20.000 till 100.000. My account was less then 20.000 and that money must be claimed at Icesave. And its not likely that Icesave will be able to do that.
Funny enough though, about 3 weeks ago I transferred all I had (about 3000 euro) to an Oanda FXTrade account and has been trading succesfully till now.
But seeing Icesave going down like this and other banks ofcourse due to the crisis, how likely is it that a broker like Oanda also declares itself bankrupt? And if it does, is all our money there gone?

Yes is not present, most likely money everyone will equally return

If broker declares Bankrupt, your money is most likely be gone regardless of who this broker is BAR NONE!

Sure alot of people (and brokers) will tell you that your money are safe in a separate "client segregated account".. Ya right!
Who will you believe? Your money or these sooth sayers?

its like China declaring their Milk/Dairy products are safe for consumption (amids the melamine contamination).. Hell ya.. I'd rather buy Milk from Australia/NewZealand like ive been doing since I got 2 babies to feed.

I know that Saxo bank and ABN Amro (MarketIndex) have account insurances up to 20k Euro.

I dont know how many of you were around in 2005, but google Refco, it will give you a good idea of how safe your money is in a bucket shop. Your money is theirs.

If you have extra cash in your account, not being used, you might want to find a safer harbor for it for the time being, till the dust settles.

fwiw.

even if you cannot consider your money safe anywhere in this world, you shouldn't also consider that all is lost if the broker goes bankrupted.

For instance in the FXLQ case people got back the total amount of the money.

Creditors have levels. Some creditors are treated w/ higher priority than others. This means that if an organization goes bankrupt and does not have enough assets to pay everyone... some ppl will get paid, others will get left holding the bag.

Depending upon the details of the bankruptcy, other creditors may be given priority over depositors. This means that depositors may find themselves on the low end of the totem pole, sitting there holding the bag.

To cover this some brokers offer depositor insurance. In the US the SIPC is designed to do this, but it's coverage does not extend to forex trades and it is a gray area at best.

As we've seen w/ Wachovia, you can have a fortune in assets and still go bankrupt because you can't sell them to cover your debts in time. In a case like that depositor accounts may very well be sold off to another organization... your account may or may not survive intact during such a transfer.

Oanda currently has over 100m in excess capital reserves. It's unlikely that it'll go bankrupt, but if it's hedged losses are too high... then nobody really knows. At the end of the day you never really know if your money is safe.

I've been saying now for some time that depositors should be given creditor preference. I just wish someone in charge would listen.

The real scary thing is the Refco was NOT a bucket shop. They were a huge publically traded company. If you had an account with Refco or RefcoFX, at the time you thought you were with one of the safest brokers around.

Also, this thread is duplicate of this one
http://www.forexfactory.com/showthread.php?t=112098

I don't believe your money is safe with any broker, in the present financial climate.

Even if the brokerage is financially healthy, the funds are deposited in some type of financial institution- bank, money market fund etc.

All of these are vulnerable to failure at any time.

There is no insuring institution that is not subject to fail.

There is no government in a position to rescue these possible failures.

We are in a situation that has never been experienced before.

One's money is not safe, be it Oanda with $100 million in reserves or with any other broker for that matter.

Thanks for all the replies. In times like these one has to take some kind of measures to protect their capital. I have calculated that with risking 2% of my capital on every trade, I can put 1/3 of my capital at the broker and allowing myself to loose 7 trades in a row without getting a margin call. By monday I will withdraw 2/3 of my capital.