Is there sth like [SIPC] law in LSE?

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Topic Author
Jing
Posts: 14
Joined: Wed Jul 03, 2019 10:07 am

Is there sth like [SIPC] law in LSE?

Post by Jing » Wed Jul 10, 2019 10:20 am

Hi
As we know that there is [SIPC] to pretect the investor in the US stock. And is there sth like [SIPC] in London Stock Exchange? And how can I confirm my broker is protected by it?

[Acronym corrected by moderator oldcomputerguy]

Tylenol Jones
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Re: Is there sth like [SIPC] law in LSE?

Post by Tylenol Jones » Wed Jul 10, 2019 12:26 pm

If you have an account with a US-based [SIPC]-insured broker than all your holdings are insured no matter what exchange they are bought at. (At least this is what I was told by IB when I enquired shortly after opening an account with them many years ago.)

[Acronym corrected by moderator oldcomputerguy]

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Phineas J. Whoopee
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Re: Is there sth like [SIPC] law in LSE?

Post by Phineas J. Whoopee » Wed Jul 10, 2019 2:35 pm

Tylenol Jones wrote:
Wed Jul 10, 2019 12:26 pm
If you have an account with a US-based [SIPC]-insured broker than all your holdings are insured no matter what exchange they are bought at. (At least this is what I was told by IB when I enquired shortly after opening an account with them many years ago.)

[Acronym corrected by moderator oldcomputerguy]
It's important to note that SIPC insurance only applies to the first $500,000 worth of assets, of which no more than $250,000 in cash is covered.

SIPC insurance guarantees the presence of your securities should your broker fail, not their values. If you buy a share for $100, and its value drops to $1 then your broker somehow absconds with your assets, the SIPC will restore the share, not the $100.

PJW

Topic Author
Jing
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Re: Is there sth like [SIPC] law in LSE?

Post by Jing » Wed Jul 10, 2019 7:04 pm

But if I use IB to trade in the LSE,in fact I trade in the IB(UK)company. Can it still be protect by SPIC which is in USA?

Tylenol Jones
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Re: Is there sth like [SIPC] law in LSE?

Post by Tylenol Jones » Thu Jul 11, 2019 12:39 pm

Jing wrote:
Wed Jul 10, 2019 7:04 pm
But if I use IB to trade in the LSE,in fact I trade in the IB(UK)company. Can it still be protect by SPIC which is in USA?
You should open an account with their US branch, and double check with them that there is SIPC coverage for the account you want to open.

DXBinvest
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Re: Is there sth like [SIPC] law in LSE?

Post by DXBinvest » Mon Jul 15, 2019 6:53 am

Jing wrote:
Wed Jul 10, 2019 7:04 pm
But if I use IB to trade in the LSE,in fact I trade in the IB(UK)company. Can it still be protect by SPIC which is in USA?
From SIPC (found on another forum): "Interactive Brokers UK (IB UK) is a subsidiary of IB LLC, so it is not a SIPC member. If it failed, SIPC could not intervene to protect any investment it held in its custody for you. If you have an account with IB UK, you may still be eligible for some level of SIPC protection if IB UK acts as an introducing brokers which introduces your account to a SIPC-member clearing broker such as IB LLC. At the risk of oversimplification, the introducing broker provides front-end services, such as opening the account and taking your orders. The clearing broker provides back-end services, such as executing your orders and actually holding on to your investment. In other words, the clearing broker has custody of your investment, not the introducing broker. Because SIPC protects the custody of your investment, this clearing arrangement is important.

If IB UK is serving as the introducing broker and it fails, then SIPC cannot intervene, but your investment should still be in safe custody with the clearing broker (e.g., IB LLC). If the SIPC-member clearing broker failed, then SIPC would protect your account. You should check with Interactive Brokers UK or review your account documents to confirm whether Interactive Brokers LLC is the clearing broker, with Interactive Brokers UK as the introducing broker. From Interactive Brokers' website, it sounds like this may be the case, but because SIPC does not regulate the securities industry, we cannot independently confirm this arrangement. The securities regulator overseeing Interactive Brokers UK may also have more information about its clearing agreements and protections for your account."

vstariradev
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Re: Is there sth like [SIPC] law in LSE?

Post by vstariradev » Thu Sep 12, 2019 9:24 am

I'm sorry for reviving this thread but I think I found some information which could make it more informative.

From the document concerning IB UK customers in section 7C we have information showing that IB LLC will hold cash and securities dealt via IB UK.
https://gdcdyn.interactivebrokers.com/U ... ormdb=3207
7. IB LLC generally shall be responsible for the following:


C. Performing certain cashiering, client money and custody services for IB UK Customers, IB UK Accounts and IB UK Transactions. Such services include, without limitation: (1) accepting and holding all money submitted to fund IB UK Accounts (including, without limitation, funds submitted for the purpose of satisfying IB UK's initial and maintenance margin requirements [collectively, "Margin Requirements"]); (2) receiving, delivering and transferring securities purchased and sold, borrowed and loaned and receiving and distributing payment therefor; (3) holding in custody and safekeeping all securities and payments so received (provided that, with respect to securities, such securities are delivered via the book entry system of a clearing organization acceptable to IB UK); (4) paying and charging interest on IB UK Accounts; (5) receiving and distributing dividends and other distributions; (6) processing securities as a result of corporate actions; (7) transferring funds to Customers; and (8) as set forth in the IB UK Customer Agreement, effectuating the liquidation of IB UK Customer positions or assets.
In essence I see IB UK really as a front-end and assets are held in IB LLC. Since IB LLC is an SPIC member, IB UK customers are still protected.

Please let me know if someone interprets it differently.

Laurizas
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Re: Is there sth like [SIPC] law in LSE?

Post by Laurizas » Thu Sep 12, 2019 11:44 am

vstariradev wrote:
Thu Sep 12, 2019 9:24 am
In essence I see IB UK really as a front-end and assets are held in IB LLC. Since IB LLC is an SPIC member, IB UK customers are still protected.
From legal point of view, you do not have a contract with IB LLC, you have a contract wit IB UK. Theoretically, you should not be concerned where assets are held, it could be North Korea for instance. If this thought is right, only UK compensation scheme applies.

vstariradev
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Re: Is there sth like [SIPC] law in LSE?

Post by vstariradev » Thu Sep 12, 2019 2:09 pm

Laurizas wrote:
Thu Sep 12, 2019 11:44 am
vstariradev wrote:
Thu Sep 12, 2019 9:24 am
In essence I see IB UK really as a front-end and assets are held in IB LLC. Since IB LLC is an SPIC member, IB UK customers are still protected.
From legal point of view, you do not have a contract with IB LLC, you have a contract wit IB UK. Theoretically, you should not be concerned where assets are held, it could be North Korea for instance. If this thought is right, only UK compensation scheme applies.
This is another section of the same document:
IB UK and IB LLC are parties to an Execution and Clearing Agreement pursuant to which IB LLC performs certain services with respect to IB UK Customers, IB UK Accounts and IB UK Transactions ("Execution and Clearing Agreement"). The Execution and Clearing Agreement permits IB LLC to satisfy its obligations thereunder by using the services of other affiliates of IB UK ("IB UK Affiliates") or unaffiliated third parties. By executing an IB UK Customer Agreement, an IB UK Customer enters into a contractual relationship with IB UK and, for the limited purposes stated therein, with IB LLC. The relationships between IB UK Customers and IB UK and between IB UK Customers and IB LLC are not altered by the Execution and Clearing Agreement.
So you do have a contact with IB LLC too although partial.

glorat
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Re: Is there sth like [SIPC] law in LSE?

Post by glorat » Thu Sep 12, 2019 10:28 pm

Laurizas wrote:
Thu Sep 12, 2019 11:44 am
vstariradev wrote:
Thu Sep 12, 2019 9:24 am
In essence I see IB UK really as a front-end and assets are held in IB LLC. Since IB LLC is an SPIC member, IB UK customers are still protected.
From legal point of view, you do not have a contract with IB LLC, you have a contract wit IB UK. Theoretically, you should not be concerned where assets are held, it could be North Korea for instance. If this thought is right, only UK compensation scheme applies.
This overall statement is incorrect. What matters is precisely the legal entity (ie the custodian) that is holding segregated assets on your behalf.

IB isn't crystal clear on who their custodians are but it is probably IB LLC for securities

IB UK are likely the entity holding your cash balance though. So keep cash to a minumum - there is no protection on that

vstariradev
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Re: Is there sth like [SIPC] law in LSE?

Post by vstariradev » Thu Sep 12, 2019 10:40 pm

glorat wrote:
Thu Sep 12, 2019 10:28 pm

IB isn't crystal clear on who their custodians are but it is probably IB LLC for securities

IB UK are likely the entity holding your cash balance though. So keep cash to a minumum - there is no protection on that
If you look at my quote from their document above you’ll see in 7C1 that IB LLC also hold the cash of IB UK customers.
(1) accepting and holding all money submitted to fund IB UK Accounts (including, without limitation, funds submitted for the purpose of satisfying IB UK's initial and maintenance margin requirements [collectively, "Margin Requirements"]);

glorat
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Re: Is there sth like [SIPC] law in LSE?

Post by glorat » Fri Sep 13, 2019 3:54 am

vstariradev wrote:
Thu Sep 12, 2019 10:40 pm
If you look at my quote from their document above you’ll see in 7C1 that IB LLC also hold the cash of IB UK customers.
(1) accepting and holding all money submitted to fund IB UK Accounts (including, without limitation, funds submitted for the purpose of satisfying IB UK's initial and maintenance margin requirements [collectively, "Margin Requirements"]);
Thanks for the clarification!

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