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Where is the safe harbour due to world financial and economic crises?

  • #21
  • Oct 30, 2008 4:38pm Oct 30, 2008 4:38pm
Quoting Rabid
Ehh... be careful there. While it's true that some might, don't for one instant think that those plans cover their depositors until you've read the fine print. It's very easy to think you're covered, when in fact you aren't.
Did I say otherwise? I actually agree with you. I was only making a general statement about certain banks vs. larger, more reputable brokerage houses. Frankly, from what I have seen in the past year, I don't think the deposit insurance policies aren't worth a pip.
  • #22
  • Oct 30, 2008 5:42pm Oct 30, 2008 5:42pm
Nah, you didn't. It just concerns me a bit when ppl play w/ generalizations. I think a lot of people assume they are protected, then something like Refco comes along and all the years of hard work come tumbling down. A cry of "But there's investor insurance!" won't matter if it turns out the terms of coverage aren't so generous.

While having external protection is certainly useful, and if you're running a fund for other people absolutely necessary, I think it goes the wrong direction. Instead of looking for what protections others give you, look to build protections for yourself. Diversify your trading activities and keep tabs your broker's liquidity. Be proactive in managing your risk.
  • #23
  • Oct 30, 2008 7:18pm Oct 30, 2008 7:18pm
Quoting Rabid
Nah, you didn't. It just concerns me a bit when ppl play w/ generalizations. I think a lot of people assume they are protected, then something like Refco comes along and all the years of hard work come tumbling down. A cry of \"But there's investor insurance!\" won't matter if it turns out the terms of coverage aren't so generous.

While having external protection is certainly useful, and if you're running a fund for other people absolutely necessary, I think it goes the wrong direction. Instead of looking for what protections others give you, look to build protections for yourself. Diversify your trading activities and keep tabs your broker's liquidity. Be proactive in managing your risk.

A general statement certainly does not constitute sufficient DD for a specific case. It never does when it comes to legality and one usually finds out that one doesn't have a pot to pee in when it comes to fund's protection. Funny how every time I wire funds to a brokerage account they get deposited under the broker's name and account number at the respective bank... not very segregated if you ask me.
  • #24
  • Oct 31, 2008 12:08pm Oct 31, 2008 12:08pm
According to IB SPIC does cover cash forex, which would make sense since forex transaction with IDEAL PRO are not contracts, but work via a system of currency account debits.
  • #25
  • Oct 31, 2008 4:24pm Oct 31, 2008 4:24pm
According to the SIPC's website Forex isn't covered. However there's a big grey area there, large enough to drive a truck thru. Did you read the thread I linked to?
  • #26
  • Oct 31, 2008 5:30pm Oct 31, 2008 5:30pm
Quoting Rabid
According to the SIPC's website Forex isn't covered. However there's a big grey area there, large enough to drive a truck thru. Did you read the thread I linked to?
I did. Last time it was a bus, not a truck.

But yes, it's all very grey. No doubt about it.
  • #27
  • Nov 3, 2008 10:15am Nov 3, 2008 10:15am
The response I received from SPIC. My email to SPIC and the response below:

Quote
To Whom It May Concern,

I would like some information about your coverage of brokerage forex accounts. Your policy specifically does not cover currency. However, brokers such as Interactive Brokers do not handle forex as contracts but rather use a system of debits to the various cash currency accounts (i.e. one for EUR, one for USD, etc.). Are these types of forex transaction and the resulting cash positions covered by the SPIC cash protection policy?(i.e. $100,000)

Thank you for your time.

Regards,


Only Interactive Brokers located in Greenwich, CT is a member of SIPC. Interactive Brokers located in various other countries are not members of SIPC.

SIPC funds are not available to protect foreign exchange trading transactions. This is true even if the transaction is conducted through a SIPC member brokerage firm. SIPC's fund are available only to protect customers who engage in securities transactions.
  • #28
  • Nov 3, 2008 12:22pm Nov 3, 2008 12:22pm
Nod. The question we had for IB was whether a person had a mixed account, and used it to trade both, would their cash balance be protected by the SIPC? Obviously their FX trades wouldn't be, but would their cash balance?

Or does the fact that the account has made forex trades invalidate that?
  • #29
  • Nov 3, 2008 12:38pm Nov 3, 2008 12:38pm
Quoting Rabid
Nod. The question we had for IB was whether a person had a mixed account, and used it to trade both, would their cash balance be protected by the SIPC? Obviously their FX trades wouldn't be, but would their cash balance?

Or does the fact that the account has made forex trades invalidate that?

Waiting for an answer from SPIC on that... will post is ASAP.
  • #30
  • Nov 7, 2008 11:32am Nov 7, 2008 11:32am
Still waiting...
  • #31
  • Nov 7, 2008 11:55am Nov 7, 2008 11:55am
Your cash balance should be protected but who knows these days.
  • #32
  • Nov 7, 2008 8:39pm Nov 7, 2008 8:39pm
Quoting fxterrapin
Still waiting...
Did the SPIC finally reply to what Rabid asked? It’d be really interesting to know if FX cash balance is out of protection because of that fact. It’s a thread that dragged my attention now that I’m back to the forums.
  • #33
  • Nov 7, 2008 9:10pm Nov 7, 2008 9:10pm
I fowarded it to SIPC a week ago and have yet to hear back. I sent another email today. Pretty irresponsible considering the potential threat to retail cutomer's funds. Don't forget, these are the people you'd have to deal with if you even have to file a claim. Years of your life gone...

It's pretty clear that the retail trader will always get the shorter end of the stick. The only way to protect funds is via a bank guarantee or letter of credit. But now we are talking a min of 250,000 USD in most cases. Not a possibility for most.
  • #34
  • Nov 11, 2008 3:05am Nov 11, 2008 3:05am
I found the following article concering WSD New Zealand on the web. This might be interesting for some of you. I don't know.

Please follow the link: http://www.articlesbase.com/currency...08-617932.html

What do you think about this?
  • #35
  • Nov 11, 2008 4:07pm Nov 11, 2008 4:07pm
Still no answer. It seems that SIPC will not answer this question.
  • #36
  • Nov 13, 2008 2:47pm Nov 13, 2008 2:47pm
Finally an answer:

If your account is denominated in another currency, those assets would be protected. SIPC does not protect foreign currency transactions (i.e. currency futures).

Having something in your account that is not covered by SIPC does not invalidate your entire account.
  • #37
  • Nov 13, 2008 4:12pm Nov 13, 2008 4:12pm
Hi,

How is the situation if the Broker is also a Bank? Are my deposits protected then? Like for ex. with Saxo Bank

I learned that AC Markets is applying for a Swiss Bank License - does anybody knows more about that?

How will be the situation with WSD Financial once they are a public company - will this have an additional impact on the safty of my deposits with them?

What do you think?

How is the situation with US american brokers? Are their some changes planed (becomming a bank or going public) in the future? Who knows something about that?

Your comments are most welcome. Thanks
  • #38
  • Nov 15, 2008 1:32am Nov 15, 2008 1:32am
Safe harbour - cash.

Do your own homework, don't expect others to do it for you. You are probably going to lose whatever money you put into it anyway (because you need to be able to research and reach your own conclusions, if you can't manage even this elementary 101 skill to arrive at a solid opinion you can literally bank on, the rest will be history).

Forex is for risk capital only.
  • #39
  • Nov 15, 2008 5:19am Nov 15, 2008 5:19am
Quote
Having something in your account that is not covered by SIPC does not invalidate your entire account.

So what they're saying then is that if you have an account that's covered by the SIPC and you're using it to trade forex in addition to other instruments, your cash balance would be protected while your trades would not be, unless the trade is specifically covered by the SIPC.

As for whether or not your trade is specifically covered by the SIPC, that's going to be a big question. There's already a big gray area on margin accounts (lots of little legalities there that limit SIPC coverage) and since spot forex accounts are usually bucket shop positions and not your own private position, they probably aren't covered as well. However if you're using an ECN and holding an actual spot position, then that may be covered.

Note: The only FX broker I've seen that's covered by the SIPC so far is interactive brokers. Only their US-based LLC is a member, their foreign departments don't appear to be.

Quote
How is the situation if the Broker is also a Bank? Are my deposits protected then? Like for ex. with Saxo Bank
Don't know how it works w/ a Swiss account, but in the US just having an account w/ a bank doesn't mean you're protected. Accounts are either covered thru insurance, or they are not. The FDIC typically covers bank depositor accounts, but if that account is used as a brokerage account it is probably not covered. That's where the SIPC comes in, they offer limited coverage for broker accounts that are insured thru them.

So it isn't so much the type or place of the account that matters, it's the type of insurance your account has that would determine how covered you are. There are obviously hybrids like a bank guarantee letter that have specific differences tho.

As for Saxo bank, you've brought them up numerous times... I'm guessing that's who you're with?

If that's the case, then you need to do your homework and check what insurance your specific account would carry, or whether it's covered by a blanket guarantee.

I did find this:
http://www.saxobank.com/?id=1560&Lan=EN&Au=1&Grp=5

Quote
Saxo Bank is a member of the Guarantee Fund for Depositors and Investors supervised by the Danish Ministry of Economics and Business Affairs. In the unlikely event that Saxo Bank should run into financial difficulties, your cash deposit of up to DKK300,000 (approximately EUR40,000) and securities of up to EUR20,000 are guaranteed by the fund. Other independently-owned physical securities such as shares or bonds will be returned to you in accordance with the laws that establishes segregation for such securities, provided that no prior dispute about...
So here's what it's saying...

Cash balances up to 40k euros would be covered, securities up to 20k euro would be covered. Non-security transactions or non-cash transactions (like options or futures) would probably not be covered. Cash balances in a foreign currency might be covered, but forex trades (spot currency transactions) may or may not be covered depending on how they're held at the company (see above).

More inforation here:
http://www.saxobank.com/?id=960&Lan=EN&Au=1&Grp=5

Obviously if the guarantee fund went belly-up then you'd end up w/ no coverage at all. Not sure whether "supervised by the Danish Ministry of..." means it's backed by gov't funds or not.

They also claim that they have an additional "PCA guarantee" which is a contingency fund to cover additional losses not covered by the standard guarantee fund. That is an inter-bank fund, and not a gov't sponsored fund. However it is not a specific depositor insurance fund but rather a creditor insurance fund, which means you would first have to file your claim as a creditor during a bankruptcy proceeding. Limitations may apply, so only your cash balance may be covered.
  • #40
  • Nov 15, 2008 9:51am Nov 15, 2008 9:51am
Quoting Jade Gate
Safe harbour - cash.

Do your own homework, don't expect others to do it for you. You are probably going to lose whatever money you put into it anyway (because you need to be able to research and reach your own conclusions, if you can't manage even this elementary 101 skill to arrive at a solid opinion you can literally bank on, the rest will be history).

Forex is for risk capital only.
Yes, indeed, one should form one's own opinion, but there is no need for this kind of response. In an era of high debt and bloated money supplies it is not at all elementary to ask this type of question. There are plenty of pro and contra cash arguments. I happen to agree with you and believe that ultimately most asset classes with sell-off quite violently (and therefore become very oversold at one point). My reasoning is based on demographics and the credit markets)

Sell-off order:

1. realestate
2. stocks
3. commodities

Next:

- antiques (just saw some for the first time at the near-by recycling center, with price lables on them!)

- numismatics. This is one class that has yet is experience a slump, but over the next few years it probably will. Especially anything that is mid-range (i.e. to expensive for the rif-raf, yet not dear enough for somebody like Trump to scoop it up). Also I simply don't see the next generations being interested in this stuff (aside from the fact that most are in debt).
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