Pepperstone vs ICMarkets? ASIC vs FSA? Negative Balance protection? Compensation Scheme?

Broker Discussion Forex Brokers
1

Dear all,

I’m about to sign up with either one or the other (or maybe both) Pepperstone and ICMarkets in Australia after a move here.

They say you should read the fine-print before signing up. I did, and it doesn’t compute.

ICMarkets offers Global (Seychelles) with FSA regulatory oversight or Australian region-ASIC. I understand there was a big debate regarding this when they started the off-shore option.

However, ICMarkets ASIC does not offer Compensation Scheme. ICMarkets FSA does up to 1M USD. ICMarkets Cytec (EU) as a comparison offers 20.000USD.

Similarly, Pepperstone Australia offers ASIC regulatory oversight only - with no compensation scheme.
Both ICMarkets and Pepperstone have segregated funds, but if the company would go in liquidation - does that mean that Pepperstone and ICMarkets with ASIC regulation is worse off as they have no Compensation Scheme available for FSA? I asked the companies - but have not heard from them as of yet.

ICMarkets has negative balance protection. It’s clearly stated in the Australian and In the EU Terms & Conditions. There is a disclaimer that you are not allowed to play the bank intentionally, which I believe is fair. However, in the Terms & Conditions for FSA, there is nothing on negative balance protection. How do you even interpret this? Does it even really exist for FSA account holders?

Furthermore, and this is suprising, Pepperstone claim that negative balance protection is on case-by-case assessment. So if the market suddenly goes for a dive (which I think it may very well do one day - maybe not a day too soon), then Pepperstone may say - well… you know… we decided not to waive your negative balance - because it would put us in liquidation. Sorry!

As always, the devil is in the details. What is your take?

I like to sleep well at night and know that if I do stack in part of my my cash, I won’t be done over if there is a crash on the market and my last line of defence (negative balance protection) is not valid.

I would prefer to know that whatever money I have in the account isn’t smoked in case broker goes into liquidation. I’m old enough to remember the Swiss Franc debacle where my broker went bust and being bought out.

So how do you pick and chose? Does anyone read the smallprint?

2

Both brokers are well established, and IMO, I cannot see that their risk exposure - if any - would affect traders except if the whole global financial markets blew out overnight.

And what is more important is for the brokers to state in their Terms and Conditions they cut trades when traders overshoot the margin exposure. That assurance is a precursor to Negative balance protection as well as protecting the remaining account balance.

I note that Pepperstone are very quick on the uptake if a trader does not have enough money to enter a trade. And I have traded IC markets for years, enough to regard them as proficient in regards to strict compliance with regulatory bodies. Which, as an example, means that they will only allow withdrawals to be paid back to the originating bank account where the deposit was made.

Eliminating risk in financial markets is never 100% sure. Hope that helps.