Interactive Brokers and Brexit - Lower account protection

[Martin Everson]

Anyone seen the brexit notice on IB's homepage?

Seems non UK clients using IBUK from EU will need to migrate to one of the new entities in EU i.e either IB Ireland, IB Hungary or IB Luxembourg. Seems IB IE and and IB LU will only offer a max protection of €20,000 and IB HU will offer up to €100,000. Therefore it seems EU clients will be exchanging the $500,000 IBLLC US protection and £50,000 IBUK protection they have now in return for the newer much lower protections.

Is this correct? Anyone got notice of this from IB?

 

[BlueMist]

And why would the protection be important? In case of failure IB would be taken over by someone else and in any case securities should not be affected, right? Also the $500k I want to see how it would work if IB would really do something stupid... I read a lengthy discussion some time ago about SIPC $500k coverage of SEC "securities" and for instance it is not clear as to if ETFs would be classified as a "securities"... Also the non US persons holding non US securities would probably be at the bottom of the list to get any kind of compensation I guess.

 

[fshore]

Anyone seen the brexit notice on IB's homepage?

Seems non UK clients using IBUK from EU will need to migrate to one of the new entities in EU i.e either IB Ireland, IB Hungary or IB Luxembourg. Seems IB IE and and IB LU will only offer a max protection of €20,000 and IB HU will offer up to €100,000. Therefore it seems EU clients will be exchanging the $500,000 IBLLC US protection and £50,000 IBUK protection they have now in return for the newer much lower protections.

Is this correct? Anyone got notice of this from IB?

Do you mean that EU clients used IBLLC and not IBUK? How did you previously get 500k insurance if your account was with IBUK?

 

[mmueller]

I'm really confused about which country I'm an "IB client" of. I wasn't asked to migrate when I logged in, but does anyone have any idea how to check this definitely?

 

[Martin Everson]

And why would the protection be important?

So you don't lose value of your assets if broker goes bust. IB has lost money during many market events i.e Oil future price turned negative, swiss franc unpegging etc. The big one could be around the corner.

In case of failure IB would be taken over by someone else and in any case securities should not be affected, right?

Wrong. You only have UK £50k protection and a further $500k depending on if you trade certain products that are done over IBLLC (the US entity) via your IBUK account. In the event of liquidation of the broker you may only get back the maximums now I said in my original post.

Also the $500k I want to see how it would work if IB would really do something stupid... I read a lengthy discussion some time ago about SIPC $500k coverage of SEC "securities" and for instance it is not clear as to if ETFs would be classified as a "securities"...

Yes nothing is clear with IB and that is very deliberate of them in doing this. However with the new setup its clear there will no longer be the SIPC $500k for EU clients.

Also the non US persons holding non US securities would probably be at the bottom of the list to get any kind of compensation I guess.

I posted a while ago how SIPC nearly went bankrupt. Below is the full thread on the debate we had.

https://www.offshorecorptalk.com/threads/interactive-broker-as-personal-bank.29973/

Do you mean that EU clients used IBLLC and not IBUK?

Yes it seems you had access to IBLLC via IBUK. IB writes:

"This is an important document regarding the proposed transfer of your account from IBUK and IBLLC to IBCE that requires your attention."

"As you will be aware, at present, your relationship with Interactive Brokers is led by our entity based in the United Kingdom, specifically Interactive Brokers (U.K.) Limited (“IBUK”) and the services provided to you are provided by IBUK and, depending on the products you do business in, our US affiliate Interactive Brokers LLC (“IBLLC”)"

How did you previously get 500k insurance if your account was with IBUK?

See the below post by Jackfrost

https://www.offshorecorptalk.com/threads/interactive-broker-as-personal-bank.29973/post-146301

I'm really confused about which country I'm an "IB client" of. I wasn't asked to migrate when I logged in, but does anyone have any idea how to check this definitely?

I would ask them if you live in EU. I stopped using IB years ago as I don't trust any american broker especially IB as they are opaque in explaining account protection for non-US persons. I instead go with banks brokerage services that have a solid balance sheet and pay that little bit extra in custody fees to avoid drama as my assets exceed the $500k protection level.

 

[BigUnicorn]

It also seem that Swiss clients will get switched to EU entity. Which is crazy given CH being outside EU and chosen by many for that reason.

TD Ameritrade is an other option which accepts Swiss residents, but more expensive.

They’re keeping some high net worth accounts on the UK entity at their discretion.

 

[Martin Everson]

I wonder what clients would elect for their IB account to be in Hungary? IB have lost the plot with the move if they go ahead with the proposals . I wouldn't touch a bank or EMI in Hungary let alone have my brokerage account there and that's regardless of whether they offer 100k euro protection or not. The country is a sh1thole country ran by a far right nut case and the second most corrupt country in the EU. It's no place to keep any assets period.

 

[lacomaco]

I wonder what clients would elect for their IB account to be in Hungary? IB have lost the plot with the move if they go ahead with the proposals . I wouldn't touch a bank or EMI in Hungary let alone have my brokerage account there and that's regardless of whether they offer 100k euro protection or not. The country is a sh1thole country ran by a far right nut case and the second most corrupt country in the EU. It's no place to keep any assets period.

Of course everyone is entitled to his opinion, and I do not want to get into a debate who is right or wrong, who is right-wing and who is left, and which country from the 10 joining in 2004 is more or less corrupt, but:

What would you say if I would call the Baltics the largest sh1thole with a financial system mainly owned by Russian crooks or stupid Scandinavians, which was hugely overabused by nothing more or less by pure money-launderers for the last 25 years, helped by professionals, many of them on this board still participating in this business? Probably that would be very rude personally and probably improfessional to say that so I am not doing that... Let's say every country has positives and negatives... We should also wait some years till we see how the EMIs operating in big number from the Baltics would be viable businesses, and how many of them would dissappear simply because it is very hard to be profitable. Revolut is unable to earn serious profits, even though their economies of scale are quite better than the majority of the EMIs.

I would be happy to participate in such a debate, if it is kept on a professional and not personal level.

And to finish my rants - And I might be wrong

 

[daxbr]

I wonder what clients would elect for their IB account to be in Hungary? IB have lost the plot with the move if they go ahead with the proposals . I wouldn't touch a bank or EMI in Hungary let alone have my brokerage account there and that's regardless of whether they offer 100k euro protection or not. The country is a sh1thole country ran by a far right nut case and the second most corrupt country in the EU. It's no place to keep any assets period.

I am for exactly the reasons you mentioned. Also keep in mind, you can have account IB account in Hungary but ask IB to move it to US server (or to any other IB location). Quite a benefit for Bahamas residents.

 

[Martin Everson]

What would you say if I would call the Baltics the largest sh1thole with a financial system mainly owned by Russian crooks or stupid Scandinavians, which was hugely overabused by nothing more or less by pure money-launderers for the last 25 years, helped by professionals, many of them on this board still participating in this business?

I would say you are right.

We should also wait some years till we see how the EMIs operating in big number from the Baltics would be viable businesses, and how many of them would dissappear simply because it is very hard to be profitable.

I went into the economics of running an EMI in a thread somewhere. It is indeed the most unprofitable slim margin business you can start that relies purely on volumes to achieve economy of scale. It's easy to spot the laundromats among them as they are the EMI's that are making money by charging huge fees, poor KYC and housing shady clients and transactions. Most of these young spotty faced, Macbook carrying kids operating these EMi's are just unsuspecting front men for those EMI's funded by criminal gangs.

But lets not digress too far from topic.

 

[lacomaco]

I would say you are right.



I went into the economics of running an EMI in a thread somewhere. It is indeed the most unprofitable slim margin business you can start that relies purely on volumes to achieve economy of scale. It's easy to spot the laundromats among them as they are the EMI's that are making money by charging huge fees, poor KYC and housing shady clients and transactions. Most of these young spotty faced, Macbook carrying kids operating these EMi's are just unsuspecting front men for those EMI's funded by criminal gangs.

But lets not digress too far from topic.

I think we are in full agreement!

 

[mmueller]

For anyone else interested and to answer my own query previously in this thread about IB country, I received a reply from their support to check the top of my activity statement. I have "Interactive Brokers LLC, Two Pickwick Plaza, Greenwich, CT 06830" up there which means I'm a customer of the USA IB. If your country is attached to another IB division, you will have something else, at least that was how I understood IB support.

 

[Martin Everson]

So your ok I guess

 

[LegitBananas]

Anyone seen the brexit notice on IB's homepage?

Seems non UK clients using IBUK from EU will need to migrate to one of the new entities in EU i.e either IB Ireland, IB Hungary or IB Luxembourg. Seems IB IE and and IB LU will only offer a max protection of €20,000 and IB HU will offer up to €100,000. Therefore it seems EU clients will be exchanging the $500,000 IBLLC US protection and £50,000 IBUK protection they have now in return for the newer much lower protections.

Is this correct? Anyone got notice of this from IB?

Newbie question but is that protection only for cash held with IB or all assets in the account combined? I mean you lose your holdings if IB goes bust (if you hold stocks worth more than the insurance amount)?

 

[Martin Everson]

Newbie question but is that protection only for cash held with IB or all assets in the account combined?

Good question. A quick look for example for Luxembourg protection they say the below. So I assume cash is not covered by the protection at least for Luxembourg entity. You need to explore each new IB jurisdictions protections or ask IB to clarify.


"The scheme covers investment products including:

• Public and private company shares
• Units in collective investment schemes
• Tracker bonds
• Futures and options"

I mean you lose your holdings if IB goes bust (if you hold stocks worth more than the insurance amount)?

If IB goes bust then bankruptcy proceedings take place. You can get 100% of your portfolio back, a max of the deposit protected amount or any amount in between. So for example if you have a 500k stock portfolio with IB Luxembourg you could get back all 500k in a bankruptcy. Or in absolute worst case just 20k via Luxembourg deposit protection. Or in a better case anything from 20k-500k depending on whatever formulae the appointed insolvency firm uses to divide up remaining assets.

 

[DavidS]

Does anyone know the deadline for W8 forms? IB are requesting them, but not sure of deadline.

 

[boomy]

I went into the economics of running an EMI in a thread somewhere. It is indeed the most unprofitable slim margin business you can start that relies purely on volumes to achieve economy of scale. It's easy to spot the laundromats among them as they are the EMI's that are making money by charging huge fees, poor KYC and housing shady clients and transactions. Most of these young spotty faced, Macbook carrying kids operating these EMi's are just unsuspecting front men for those EMI's funded by criminal gangs.

that's exactly what I thought about them. They are young, neards and don't know much about KYC and similar issues with financial transactions.

Wonder how long it will take before we see the first story about one of them arrested.