Hi there, new to the forum. I finally got fed up with UBS's insane fees and poor service, ripped the band aid off and liquidated everything. I'm going to sit out earnings season and then reinvest towards the summer with a new provider. I have an IB account, but contrary to what I saw you write elsewhere, when I read the small print it was clear that the account was hypothecated (full title transfer). Have they changed, or have a I just ended up with a US account? How else are their fees so low? At the moment I'm wary about using it extensively. Also have a revolut account, which I gather you're not too fond of. Romania, right? But at least the funds are in omnibus client custody...
Interactive Brokers and segregation?
- Thread starter Rob71
- Start date
Hi @Rob71
Can you develop what you mean by hypothecated? I never heard that term in relation to a broker.
They have not changed anything recently. IB is a US broker, with multiple entities in Europe. As Swiss investors, we use the IB UK entity and they do use omnibus accounts (always have I believe).
Can you develop what you mean by hypothecated? I never heard that term in relation to a broker.
They have not changed anything recently. IB is a US broker, with multiple entities in Europe. As Swiss investors, we use the IB UK entity and they do use omnibus accounts (always have I believe).
OK- by way of background I'm a lawyer and I've worked in investment banking and asset management most of my career. Hypothecated is a broad term, full title transfer more specific I think. Either way it means you don't own your securities, the broker does and you just have a right to redelivery of them. They do this so they can lend them out to short sellers and they make money this way (in the US), which is generally -- at least in the past -- how brokers like in offer low or even no commissions. So you have a major insolvency risk in the event (unlikely as it is) that IB goes bust. You have an article on it on your blog and state that in Switzerland clients are contracted with IB UK who obviously have to segregate client assets under CASS. I'm just querying whether that's the case, and where you got that information, because I don't think it is for me.
From the IB website, it seems it may be only if you are trading on margin (which I'm not). They talk there about (re)hypothecation. Can't find terms and conditions anywhere on the portal though, so have raised a ticket. I definitely read full title transfer when I signed up though, which is why I've always been wary.
IB UK and IB US operate in the same way, with omnibus accounts. If I wrote differently, I was not clear and I'll edit it to make it more clear. I still call this segregation, but it's indeed a much weaker form of segregation than Swiss brokers which have accounts in the name of each customer.
As for share lending: By default, IB does not lend your shares. You have to optin to the feature to get that. And this is again the same for IB UK and IB US
For protection, both IB UK and IB US give you the same level of protection, through SIPC (US protection).
Now, there are some other entities such as IB IE, but I am not familiar with the level of protection or segregation they offer.
As for share lending: By default, IB does not lend your shares. You have to optin to the feature to get that. And this is again the same for IB UK and IB US
For protection, both IB UK and IB US give you the same level of protection, through SIPC (US protection).
Now, there are some other entities such as IB IE, but I am not familiar with the level of protection or segregation they offer.
Let us know what they say!