banks are insured by FDIC
stock brokers are insured by SIPC
what about forex brokers? who is doing the insurance? SIPC as well?
For the most part it depends on the broker. Some are self insured. Most decent brokers are usually owned by either a bank or other trading company and are insured that way. If you look around a lot of US brokers are owned by ameratrade and a few others companies I cant remember the name of at the moment. Really just do your homework on your broker the info is out there. If they are a respectable broker and they are owned by a larger trust the the larger will want to put there name in there somewhere.
Insure from what?
I heard about a biggest american broker that faked it’s annual reports and eventually many people lose money! What is ensured?
After Enron and Lehman, I feel like anything can happen to these financial institutions. They are driven by greed.
Mainly they are insured from you. Giving them fake money and stuff. There are alot of reasons they should be insured. Lawsuits they are not really insuring your money per say but more themselves as a company. How you benefit from that is if they get sued they most likly wont go out of buisness so your money will be safe.
In the US - isn’t there a SEC covering up to a few million insurance?
Also, some places hold your money in segregated accounts so even if the broker went bust, the money would not be part of their assets and you’d get it back. If the bank ho,ding the segregated money went bust, that’s a different matter.
On a related note, I had an account with Alpari NZ last year (they’re still based in Russia I think…)…anyways, never had any problems with them or anything, but one thing that struck me as odd was when I emailed them asking what kind of insurance coverage our accounts had, if any. The response killed me, something to the effect of “not to worry, we have insurance covering 15 million dollars of our client accounts”. When you divide this amount by the number of traders they claim to have, I had a figure that was less than $100 per trader, scary eh?! I know FxPro accounts are covered up to 20K (euro or dollar I’m not sure), but it nevertheless pays to ask your broker what their coverage is. And once your capital exceeds the insurance coverage maybe switch brokers.
If I lose my money on trading, I have no one to blame. However, if I lose my money on broker bankruptcy, I will be much more upset than losing on a trade.
To me, it looks like choosing a forex brokerage is a long term investment as well since clients’ assets are not fully insured.
Agreed forex is a lifetime investment. You would not put your money in a bank that is broke would you. Why would you want to do it with a broker.
Banks have insurance covered up to $250,000 in US, but now Forex brokers are unsure if your money are insured or not. what johnedward said is a factor as well. Even though the FX brokers claim that they put up additional funds for insurance, if the money turns out to be not enough for everybody. Then clients will get less of their account value. Once the broker declares bankruptcy, your money probably locked already. I hope clients goes first, then creditors.
So it is like a double investment now. Choose a broker with great net assets.