Client Money Safety? suggest broker/ jurisdiction

I am not from US , I am in Australia and although we have good Corporate governance There is no protection for Client money Safety if a OTC market provider ( FX is not exchange traded) the broker goes out of business.

SO I am actually want to find out which jurisdiction is best for
1) Client money safety
2) Still allows hedging?

Any suggestions?
UK has FSA insurance but when I inquired the FCCS ( the insurance arm) kept saying that the "Product" has to be a approved product!
Sounds like it only applies if you are trading with a UK broker for UK Exchange Traded Product not FX!

from what i know about the US and UK, I personally think AUS is as good as any ware else for OTC.

The old saying rains true, "never keep more then you can afford to lose with your broker."

The other issue with the US these days is all the new limitations (regulations) for FX trading.

I'm from Canada and have the same concerns so I chose Dukascopy. They are a Swiss regulated bank now and the theory is that your Forex deposit with them is guaranteed in case of Bankruptcy up to 100 CHF which is about 100K AUD give or take. If I'm wrong, then someone please prove me wrong otherwise I am under the impression my money is safer with them than any other broker on the planet.

If you choose them, I have noticed they don't cater to the "little guy" such as myself and ignore a few questions in my emails that many may find important, but I think that is because they are really busy, have a solid reputation and never accepted retail clients in the past. They more or less expect you to know what you are doing, to read their conditions and trade away, so I'm ok with that for the safety of my deposit with them. If you talk to any of them live over the phone though, they are very good and friendly and go out of their way to help you.

CitiFX has deposits FDIC insured up to $250K. I think accounts have to be denominated in USD, and I don't know if not being a US resident has any effect. But they are one of maybe 2-3 forex brokers that offer that kind of protection that I know of (I don't recall the names of the others, but there was a thread here about it not long ago).

But there's no hedging of course...

What about Interactive Brokers and Saxo Bank ? they do offer protection of funds, as far as i know.

Saxo Bank ... in Which country is the money protected? Eu/ Singapore?
They don't have direct retail in Aus
I just lost my money with a Saxo bank white label in Australia called Sonray Capital markets becasue it went down alleged fraud
Saxo is not ECN. but have interesting things like FX options
And because they have white labels in AUs I can't trade with them directly

I will try Alpari UK

Aus Client money safety Sucks big time

You gotta read the fine print. For example, FDIC insurance (like for Citi) only covers USD deposits, EURs and other ccys aren't covered (afaik). Not sure if CH bank insurance only covers CHF. Might want to check that.

UK has a customer compensation fund for broker bankruptcies. Since London is the center of the world as far as fx is concerned too, its imo a good jurisdiction.

I don't know now, but a few years ago the deposits in the swiss banks was guaranted only 20K CHF max !

Shrike
I tried to get a straight answer from www.fscs.org.uk

MY Question was very simple.. if I trade with FSA regulated FX broker ( not stock broker on LSE) are my fund covered by your insurance?

BUT I never got a clear answer
Have a look at the Chain of round and round emails

Gary Robinson" <[email protected]> Add sender to Contacts To:
"'mahesh joglekar'" <[email protected]>

Dear Mr Joglekar

Thank you for your E mail of 6 August 2010 about protection for investments involving FOREX companies under the Financial Services Compensation Scheme (FSCS).

When replying to your previous E mails, I have been liaising with our Legal department and our position on this matter is as previously stated.

It is not always possible to generalise about products. Whether a particular product is protected under the FSCS or not, will depend upon the product’s terms and conditions.

I hope this is helpful. However, if you have any further questions please contact us again or telephone our helpline on 020 7892 7300 or freephone 0800 6781100.

Yours sincerely



Gary Robinson
Senior Claims Officer


Any personal information you provide us with will be held by the Scheme in accordance with our data protection policy, which is available on our website or on request.



From: mahesh joglekar [mailto:[email protected]]
Sent: 06 August 2010 13:43
To: Gary Robinson
Subject: Re: FSCS

I will try with the provider but all they are saying is we are regulated by FSA
That still leaves the huge question of is the product designated investment”?
Is ther any chance taht you can ask FSA?
Becasu thsi will affect thousands if FX is not a "designated investment” then millions could be at risk! from thinking that they have a cover but in fact they may not?

Is there any way to take this higher up within FSCS and FSA?

--- On Fri, 8/6/10, Gary Robinson <[email protected]> wrote:

From: Gary Robinson <[email protected]>
Subject: FSCS
To: "'mahesh joglekar'" <[email protected]>
Date: Friday, August 6, 2010, 8:02 PM

Dear Mr Joglekar

Thank you for your E mail of 2 August 2010 about protection for investments involving FOREX companies under the Financial Services Compensation Scheme (FSCS).

We do not review every product that is offered by firms authorised to conduct regulated business in the UK .

Whether a particular product falls within the definition of a “designated investment” will depend upon the product’s terms and conditions.

If you would like to know more about a particular product, you should liaise with the provider.

I hope this is helpful. However, if you have any further questions please contact us again or telephone our helpline on 020 7892 7300 or freephone 0800 6781100.

Yours sincerely



Gary Robinson
Senior Claims Officer


Any personal information you provide us with will be held by the Scheme in accordance with our data protection policy, which is available on our website or on request.

From: mahesh joglekar [mailto:[email protected]]
Sent: 02 August 2010 14:00
To: Gary Robinson
Subject: RE: FSCS

Dear Mr Robinson
I appreciate your efforts but this still keeps things unresolved

It seems just being FSA regulated firm is not enough , the instruments that firms is offering for trade if they are not deemed "designated investment”" the clients have no protection
I am surprised that FSCS does not know for sure if The FX contracts offered by FSA regulated firms in UK are deemed as "designated investment”" or not?
Why does it have to wait until something goes wrong!
Can you/ your legal not talk to FSA and clarify this?
Is there a list of designated investment”? Such as Shares/ Options/ ETF/ Futures etc
FX margin trading is not new to UK so how come FSCS does not know if it's status ?
I am most surprised and concerned and confused

I hope you talk to FSA people and clarify

Mahesh Joglekar



--- On Mon, 8/2/10, Gary Robinson <[email protected]> wrote:

From: Gary Robinson <[email protected]>
Subject: RE: FSCS
To: "'mahesh joglekar'" <[email protected]>
Date: Monday, August 2, 2010, 7:53 PM

Dear Mr Joglekar

Thank you for your E mail of 29 July 2010 about protection for investments involving FOREX companies under the Financial Services Compensation Scheme (FSCS).

I have been liaising with our legal department.

The important question is whether the contract here is a regulated “future” (and so falls within the definition of a “designated investment”, and in turn, is in principle covered by FSCS if the claim made is “in connection with protected investment business” or whether the contract is an unregulated forward FX contract (which falls outside the definition of a “designated investment”) and therefore would not be covered.

As stated previously, unfortunately, until a claim is presented we would be unable to provide a more definitive response as only then would we be able to carry out a full assessment of the eligibility of any claim.

I hope this is helpful. However, if you have any further questions please contact us again or telephone our helpline on 020 7892 7300 or freephone 0800 6781100.

Yours sincerely



Gary Robinson
Senior Claims Officer


Any personal information you provide us with will be held by the Scheme in accordance with our data protection policy, which is available on our website or on request.

From: mahesh joglekar [mailto:[email protected]]
Sent: 29 July 2010 10:00
To: Gary Robinson
Subject: Re: FSCS

I am sorry but this still confuses the issue
As a consumer my problems is these firms are FSA approved and known thus one automatically assumes that one is covered!
Example IG markets, alpari UK etc
But from your email it does not make it clear
The question is simple is it ok to assume that client money is covred by this insurance for any firms which offers financial products and is FSA approved ?
As simple as that
I hope you investigate as this is a big concern when opening accounts one needs to know what protection is there?
May be you can talk to them!
Mahesh Joglekar
Australia

--- On Thu, 7/29/10, Gary Robinson <[email protected]> wrote:

From: Gary Robinson <[email protected]>
Subject: FSCS
To: "'mahesh joglekar'" <[email protected]>
Date: Thursday, July 29, 2010, 4:53 PM

Dear Mr Joglekar

Thank you for your E mail of 20 July 2010 about protection for investments involving FOREX companies under the Financial Services Compensation Scheme (FSCS).

Whether this activity is covered by the FSCS will ultimately depend upon the precise terms and conditions at play here. The contract may or may not fall under the definition of a “designated investment” for the purposes of compensation.

To reiterate, each claim we receive, is considered on its individual merits, including reference to manner the investment is held (individually or part of a larger product / instrument) and of course the reason for a claim being presented. Unfortunately, until a claim is presented we would be unable to provide a more definitive response as only then would we be able to carry out a full assessment of the eligibility of any claim.

I hope this is helpful. However, if you have any further questions please contact us again or telephone our helpline on 020 7892 7300 or freephone 0800 6781100.

Yours sincerely



Gary Robinson
Senior Claims Officer


Any personal information you provide us with will be held by the Scheme in accordance with our data protection policy, which is available on our website or on request.

From: mahesh joglekar [mailto:[email protected]]
Sent: 20 July 2010 12:37
To: Gary Robinson
Subject: Re: FSCS

Dear Mr Robinson
What I am referring to Is Fx margin trading. or in other words a CFD on currency excahneg rates? NOT actual currency exchange like travelers do

You mentioned that "I can confirm that if the underlying business activity is an investment, such as futures or contracts for difference, then this is protected under the investment sub-scheme of the FSCS. If the activity is just an exchange, then this is not protected.

So is FX trading considered a CFD? adn covered?
Firms such as www.alpari.co.uk
Unfortunately I still can't make out if it is covered or not?


--- On Tue, 7/20/10, Gary Robinson <[email protected]> wrote:

From: Gary Robinson <[email protected]>
Subject: FSCS
To: "'mahesh joglekar'" <[email protected]>
Date: Tuesday, July 20, 2010, 6:24 PM

Dear Mr Joglekar

Thank you for your E mail of 16 July 2010 about protection for investments involving FOREX companies under the Financial Services Compensation Scheme (FSCS).

As you may be aware, the Financial Services Compensation Scheme (FSCS) deals with claims against firms authorised in the United Kingdom , which have ceased trading and are not in a position to settle their own claims. We are a fund of last resort, and must review all claims and potential claims in line with our rules, as set by the Financial Services Authority (FSA), the United Kingdom regulator.

In the event of an FSA authorised firm being declared “in default” (i.e. we are satisfied that it is unable, or likely to be unable, to meet the claims against it), cash held with that firm in nominee accounts (for the purposes of investing in futures contracts, commodity options, currency) would, depending on the exact terms on which the funds are held, most likely be protected by the FSCS as an investment.

If the regulated investment service becomes insolvent and owes money to the investor, the limit is £50,000 per investor, per relevant institution, for firms declared “in default” after 1 January 2010. This situation might, for example, arise if the investment firm misappropriated funds held for investment.

I can confirm that if the underlying business activity is an investment, such as futures or contracts for difference, then this is protected under the investment sub-scheme of the FSCS. If the activity is just an exchange, then this is not protected.

You should clarify with the firm concerned precisely how and where they intend to hold the funds you invest with them, as funds held in areas not authorised by the FSA, may not benefit of protection provided by the FSCS.

I would ask you to note that we do not have any experience of claims of this nature and so cannot be certain of how they would be dealt with in practice, should a firm of this type become insolvent. However, the information provided in this E mail should be considered a guide based on our understanding on the information you have provided and the rules we operate under. This E mail is not to be considered to provide definitive answers in relation to your relationship with a financial service firm now or in the future.

However should be aware that each claim we receive, is considered on its individual merits, including reference to manner the investment is held (individually or part of a larger product / instrument) and of course the reason for a claim being presented. Unfortunately, until a claim is presented we would be unable to provide a more definitive response as only then would we be able to carry out a full assessment of the eligibility of any claim.

Please note that the information provided in this E mail should be considered a guide based on our understanding on the information currently available and the rules we operate under. This E mail is not to be considered to provide definitive answers in relation to your relationship with a financial service firm now or in the future.

Any personal information you provide us with will be held by the Scheme in accordance with our data protection policy, which is available on our website or on request.

I hope this is helpful. However, if you have any further questions please contact us again or telephone our helpline on 020 7892 7300 or freephone 0800 6781100.

Yours sincerely



Gary Robinson
Senior Claims Officer

From: mahesh joglekar [mailto:[email protected]]
Sent: 16 July 2010 09:11
To: Gary Robinson
Subject: Re: FSCS

Hello Mr Robinson
Sorry I probebaly did not us eteh correct term
What I ment by FOrex was Forx Trading / margin trading facility provided by like sof Alpari and FXCM.. Not just transferring foreign exchange
FX margin trading SO in case these firms go bankrupt and I as a trading client have cash / positions with them thne is teh cash as well as the open position protected ?
As compared to Shares broker
Th cause of the broker firm going our of business could be anything including fraud
Alpari is FSA regulated
Mahesh

--- On Fri, 7/16/10, Gary Robinson <[email protected]> wrote:

From: Gary Robinson <[email protected]>
Subject: FSCS
To: "'[email protected]'" <[email protected]>
Date: Friday, July 16, 2010, 3:54 PM

#yiv971408402 #yiv971408402yiv742166960 #yiv971408402yiv742166960yiv1655834019 #yiv971408402yiv742166960yiv1655834019yiv740458512 #yiv971408402yiv742166960yiv1655834019yiv740458512yiv1496206383 unknown { font-family: Tahoma; }#yiv971408402 #yiv971408402yiv742166960 #yiv971408402yiv742166960yiv1655834019 #yiv971408402yiv742166960yiv1655834019yiv740458512 #yiv971408402yiv742166960yiv1655834019yiv740458512yiv1496206383 unknown { margin: 72pt 90pt; }#yiv971408402 #yiv971408402yiv742166960 #yiv971408402yiv742166960yiv1655834019 #yiv971408402yiv742166960yiv1655834019yiv740458512 #yiv971408402yiv742166960yiv1655834019yiv740458512yiv1496206383 #yiv971408402yiv742166960yiv1655834019yiv740458512yiv971572082 p.yiv971408402yiv742166960yiv1655834019yiv740458512MsoNormal { font-size: 12pt; margin: 0cm 0cm 0pt; font-family: "Times New Roman"; }#yiv971408402 #yiv971408402yiv742166960 #yiv971408402yiv742166960yiv1655834019 #yiv971408402yiv742166960yiv1655834019yiv740458512 #yiv971408402yiv742166960yiv1655834019yiv740458512yiv1496206383 #yiv971408402yiv742166960yiv1655834019yiv740458512yiv971572082 li.yiv971408402yiv742166960yiv1655834019yiv740458512MsoNormal { font-size: 12pt; margin: 0cm 0cm 0pt; font-family: "Times New Roman"; }#yiv971408402 #yiv971408402yiv742166960 #yiv971408402yiv742166960yiv1655834019 #yiv971408402yiv742166960yiv1655834019yiv740458512 #yiv971408402yiv742166960yiv1655834019yiv740458512yiv1496206383 #yiv971408402yiv742166960yiv1655834019yiv740458512yiv971572082 div.yiv971408402yiv742166960yiv1655834019yiv740458512MsoNormal { font-size: 12pt; margin: 0cm 0cm 0pt; font-family: "Times New Roman"; }#yiv971408402 #yiv971408402yiv742166960 #yiv971408402yiv742166960yiv1655834019 #yiv971408402yiv742166960yiv1655834019yiv740458512 #yiv971408402yiv742166960yiv1655834019yiv740458512yiv1496206383 #yiv971408402yiv742166960yiv1655834019yiv740458512yiv971572082 a:link { color: blue; text-decoration: underline; }#yiv971408402 #yiv971408402yiv742166960 #yiv971408402yiv742166960yiv1655834019 #yiv971408402yiv742166960yiv1655834019yiv740458512 #yiv971408402yiv742166960yiv1655834019yiv740458512yiv1496206383 #yiv971408402yiv742166960yiv1655834019yiv740458512yiv971572082 span.yiv971408402yiv742166960yiv1655834019yiv740458512MsoHyperlink { color: blue; text-decoration: underline; }#yiv971408402 #yiv971408402yiv742166960 #yiv971408402yiv742166960yiv1655834019 #yiv971408402yiv742166960yiv1655834019yiv740458512 #yiv971408402yiv742166960yiv1655834019yiv740458512yiv1496206383 #yiv971408402yiv742166960yiv1655834019yiv740458512yiv971572082 a:visited { color: rgb(96, 100, 32); text-decoration: underline; }#yiv971408402 #yiv971408402yiv742166960 #yiv971408402yiv742166960yiv1655834019 #yiv971408402yiv742166960yiv1655834019yiv740458512 #yiv971408402yiv742166960yiv1655834019yiv740458512yiv1496206383 #yiv971408402yiv742166960yiv1655834019yiv740458512yiv971572082 span.yiv971408402yiv742166960yiv1655834019yiv740458512MsoHyperlinkFollowed { color: rgb(96, 100, 32); text-decoration: underline; }#yiv971408402 #yiv971408402yiv742166960 #yiv971408402yiv742166960yiv1655834019 #yiv971408402yiv742166960yiv1655834019yiv740458512 #yiv971408402yiv742166960yiv1655834019yiv740458512yiv1496206383 #yiv971408402yiv742166960yiv1655834019yiv740458512yiv971572082 span.yiv971408402yiv742166960yiv1655834019yiv740458512EmailStyle17 { font-weight: normal; color: blue; font-style: normal; font-family: Arial; text-decoration: none; }#yiv971408402 #yiv971408402yiv742166960 #yiv971408402yiv742166960yiv1655834019 #yiv971408402yiv742166960yiv1655834019yiv740458512 #yiv971408402yiv742166960yiv1655834019yiv740458512yiv1496206383 #yiv971408402yiv742166960yiv1655834019yiv740458512yiv971572082 div.yiv971408402yiv742166960yiv1655834019yiv740458512Section1 { }

Dear Mr Joglekar

Thank you for your E mail of 15 July 2010 about protection under the investment sub scheme of the Financial Services Compensation Scheme (FSCS).

The FSCS was set up to investigate claims for compensation against financial firms, authorised by the Financial Services Authority (FSA) that are no longer trading and cannot honour claims against them.

For claims falling under our investment sub scheme the maximum amount of compensation we can pay is £50,000 per person per failed firm. This is made up of 100% of the first £50,000.

I can confirm that regulated investment business from the UK office of a FSA authorised firm is protected under the FSCS. The habitual residency of an investor is not an eligibility issue for investment claims.

Please note that if the activity you refer to in your E mail is just an foreign currency exchange, then this is not an activity regulated by the FSA and would not be protected under the FSCS.

I hope this is helpful. However, if you have any questions about this E mail please contact us again.

Yours sincerely


Gary Robinson
Senior Claims Officer

Any personal information you provide us with will be held by the Scheme in accordance with our data protection policy, which is available on our website or on request.

From: mahesh joglekar [mailto:[email protected]]
Sent: 15 July 2010 01:30
To: Enquiries
Subject: FCSS related question


To
The compliance officer FCSS
I am thinking of opening an account with a FSA regulated firm called Alpari UK
Who offers OTC forex margin trading
Are client funds held by them insured under your FCSS? in case of Broker going out of business or fraud?
Appreciate if you could let me know
Thanks
MIke
Australia


*************************************************************************************
This e-mail and the information it contains may be privileged and/or confidential. It is for the intended addressee(s) only. The unauthorised use, disclosure or copying of this e-mail, or any information it contains, is prohibited and could, in certain circumstances, be a criminal offence. If you are not an intended recipient, please notify us immediately.
You should be aware that FSCS monitors external emails in accordance with The Telecommunications (Lawful Business Practice) (Interception of Communications) Regulations 2000 in order to protect its business interests.
The Financial Services Compensation Scheme Limited 7th Floor Lloyds Chambers Portsoken Street London E1 8BN
Registered in England & Wales No. 3943048
Switchboard: 020 7892 7300

Interestig, They obviously dont want/cant give a definite answer. The wording on the brokers website is also always "maybe eglible for compensation", they probably didnt get a definite answer also.

So "unregulated forward fx contracts" are not protected. The firms themselvs are obviously regulated by fsa, but does that make the product (fx) regulated? Its not regulated like stocks or futures.

Now if the firm is regulated but the product not, does that mean that the free account balance is protected, but not open postions? It sounds like if you have a stock account, the stocks you hold are protected but not "unregulated fx contracts". Then the question is, how is margin on open fx positions handled, which is just a cash security deposit and not a product per se. I dont know, this would be something for a security lawyer.

Yes Shrike
That is a million $ question BUT HOW MANY PEOPLE HAVE ASKED IT?
I apeal to UK residents/ UK clients to raise thid Question.

"Now if the firm is regulated but the product not, does that mean that the free account balance is protected, but not open positions? It sounds like if you have a stock account, the stocks you hold are protected but not "unregulated fx contracts". Then the question is, how is margin on open fx positions handled, which is just a cash security deposit and not a product per se."

I second this initiative.