Pfft… up to $150M in total for all accounts. That’s a joke compared to the scale they’re working on, tens of billions (with a B) in customer assets/payables/receivables.
That’s a pretty standard arrangement in many countries AFAIK. Securities typically are not insured, only segregated from broker’s own balance sheet. So if there’s a fraud from broker’s side and securities aren’t where they’re supposed to be when SHTF, you can still have a loss. The fact that someone’s going to jail will not make you whole, SIPC will.
There was a broker failure in not so distant past, MF Global, you can google and read how it turned out as a case study
Just got an answer about depositing VT dividends on USD Forex position. They say:
It is not “thesaurierend”, so there is no automatic reinvesting of dividends. Dividends are paid in USD. It is better to buy the ETF from a USD account, to avoid the exchange costs. They provide me with USD-Konto, it is free.
Cheaper is better, but not really critical I guess.
That’s 50% better, which is way better. +1 for IB.
Is a Forex transaction from one currency to another (USD to Dollar) or any transaction (in the same currency). Maybe +1 for IB.
It seems, or they say, if I buy the ETF with USD, it will not convert.
2FA only if you ask for it, what I did. But not active right now - have to test ist, but I think this is just a MUST for an online Trading Platform and a big minus if it does not work. But something that will be addressed, I hope.
If possible, yes. Better Options welcome
“Qualified intermediary” could be the game changer for me. Current dividend yield at 2.67% means 26.7k dividends per year (for 1mill shares), which means 13.35k more with IB!
@hedgehog interesting stuff - so SIPC ist good for us, but kinda hard to understand where it is applied and where not.
The trustee liquidating the company said that the losses incurred by customers of MF Global stood at $1.6 billion at April 2012.[4][5] In January 2013, a judge approved a settlement that would return 93 percent of customers’ investments, with the prospect of additional payouts from the company’s general estate.[6][7] In December 2014, MF Global Holdings settled a U.S. government lawsuit, agreeing to pay $1.2 billion in restitution and a $100 million fine for customer losses tied to the company’s 2011 collapse.[8]
– from wikipedia
That is a loss of about 25% of the customers holdings. Bad, but not the worst case scenario if I understand it correctly.
Err… can you be a bit less cryptic? The way I understood it is that each customer of IB is insured up to 30 million, not 30 million to share. They even write, if you’ve received SIPC (whatever that means?), then it covers the remaining 29.5 million. So how is it? What do they mean with this 30 million?
And what’s your take on SIPC? Are we covered as clients of IB UK, or not?
Ok, just got this one after reading it twice! You say IB is only covering losses for 150M, but over all accounts they have? This is really a joke then.
So we do not really have a secure statement about the safety of an account!?! Can somebody (with an IB account) ask the IB support what are they paying in the “normal” worst case scenario?
Ohh, now I get it. Is this a joke? If their AUM is over 100 billion and the insurance covers 150 million, then I don’t see another reason for its existence than to mislead people. Like how does it work that the insurance covers 30 million per client, but 150 for all clients? This is maybe per case?
And the SIPC? You think our stocks are held under custody of IB LLC or IB UK? I read somewhere that it can actually take years until all the lawyers have done their job and they pay out this insurance.
Does this apply to US brokers as well?
And finally: what’s the best approach then? This particular broker going bust while committing fraud is a “black swan” event, but it could be pretty devastating for your life. How much is safe to be kept at a single broker? At which point should you start splitting your portfolio and over how many brokers? I guess 3 brokers should be enough? If one goes bust, you still have 2/3 of your wealth, and you should be able to recover the most of the last 1/3.
One reason for having a Swiss broker is that it may be easier to pledge your etf in exchange for a loan/less cash upfront for mortgages. That means you won’t have to sell stocks. I think a typical scenario is that you have 100k stock and they can be used as 30-40k equivalent own cash for a home purchase. You could pledge stock for an emergency loan, if you don’t want to have an emergency fund sitting somewhere idle.
As far as i know with IB you cannot do that. But again it is a very particular case.
up to $30 million (including up to $1 million for cash)
I don’t get it. Aren’t shares under our names already? Why would we need insurance in that case? Is it in case they aren’t really under our names or they’re stolen somehow? Or maybe in case the broker sells them without our consent?
BTW, any idea what the procedure is to get your shares transferred from a fail broker?
IB is a “qualified intermediary” so you pay only half the tax of the dividends (15% instead of 30%)
All other criterias are not a game changer for me
Having different broker accounts to manage the risk of loss through broker fail seems a good idea.
For now I will setup the CT account with the dollar-account to avoid USD-CHF conversion costs for VT dividends. In the future I will add an IB account and split the shares over this two brokers.
Yes, segregation is also of course required in the US. And there’s the SIPC insurance, a concept most countries don’t have
No, under broker’s - in the electronic records in the computers of a central depository like DTCC or SIX, and then broker has its own electronic records that you’re the ultimate owner, that’s how it works
Unless you’re rich enough to afford to buy yourself a small bank and deal with a CSD directly…
(Or another alternative for cash strapped and truly paranoid is DTC’s Direct Registration System)
Eggzactly
Well, I personally consider the forex (0.5+% savings) and lack of stamp duty (0.15%, times 2 for when you sell) to be also quite big advantages of IB. Let’s say you want to be investing 100k every year - you’re looking at spending 800+ Fr in these two charges alone at swiss brokers. On top of already draconian broker fees
Eh, don’t get your hopes up. The bank would tell you to move the stocks over to them for custody and probably bill you around 0.3-0.4% for safekeeping. You can loan the money also from IB on margin.
Yes, exchanges rates are pretty much universally marked up by 0.5-2% or even more at the banks. You’re getting robbed when you exchange currency without even knowing it.
IB gives you access to fair interbank rates for a very modest commission. For some people I know this alone is worth it to pay 120 Fr/year for an account at IB.
Perfectly legal, it’s what the law pretty much explicitly says - only domestic brokers have to pay it.
I think that’s where the combination with corner bank could be an advantage for CT. You can already deposit gold on corner bank and use it as collateral for ct. I imagine you can work out a deal with corner trader and corner bank for mortgages and pledging etf
has anyone done a USD transfer from IB to CT? IIUC 1 cash transfer on IB per month is free - so the question would be, how much would it still cost for ‘in-between’ banks and on the CT-incoming side…
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