When it comes to investing, one of the questions that eFloorTrade often receives initially is regarding the safety of customer funds and accounts. While eFloorTrade is an independent introducing broker, we entrust the services of Interactive Brokers LLC for clearing and execution services for many of our clients.
When placing your money with a broker, you need to make sure your broker is secure and can endure through good and bad times. The financial statements of Interactive Brokers LLC are available on their website for your review.
Note that Interactive Brokers LLC and its affiliates are owned by IBG LLC.
Important Strength and Security Facts about Interactive Brokers Group¹
- On a consolidated basis, Interactive Brokers Group (IBG LLC) exceeds $5 billion in equity capital
- IBG LLC’s owners are our public company, Interactive Brokers Group, Inc. (15.7%) and the firm’s employees and their affiliates (84.3%). Unlike at most other firms, where management owns a relatively small share, we participate substantially in the downside just as much as in the upside. Because of this vested interest, we run our business conservatively.
- We manage our brokerage and market making businesses in separate companies, which are registered with local securities and/or commodities regulators. We maintain strict systematic and procedural separation between the two business lines and we do not commingle or utilize customer-segregated assets for proprietary operations. Although certain affiliates of IB trade for their own account, our customer-facing businesses do not conduct proprietary trading.
- We hold no material positions in over-the-counter securities or derivatives. We hold no CDOs, MBS or CDS.
- Our positions are marked to market daily and the resulting payables/receiveables are reconciled to outside sources automatically.
- Our real-time margining system marks all customer positions to market continuously. All orders are credit vetted before being executed and positions in accounts with inadequate margin deposits are liquidated automatically.
- We have reported solidly positive earnings for over 20 consecutive years.
- Interactive Brokers LLC is rated ‘BBB+’; Outlook Stable by Standard & Poor’s.
How We Handle Customer Assets
Customer money is segregated in special bank or custody accounts, which are designated for the exclusive benefit of customers of IB. This protection (the SEC term is “reserve” and the CFTC term is “segregation”) is a core principle of securities and commodities brokerage. By properly segregating the customer’s assets, if no money or stock is borrowed and no futures positions are held by the customer, then the customer’s assets are available to be returned to the customer in the event of a default by or bankruptcy of the broker.
A portion of customer funds are typically invested in U.S. Treasury securities. Although permitted by CFTC regulations, given the credit concerns over foreign sovereign debt IB does not currently invest any customer money in the money market funds.
As a practice, IB holds an excess amount of its own money in these reserve and segregated accounts to ensure that there is more than enough cash to protect all customers.
Commodities customer money is protected as follows:
- A majority is invested in U.S. Treasury securities, which are held at a custody bank in a safekeeping account segregated for the exclusive benefit of customers.
- A portion is invested in U.S. Treasury securities and pledged to futures clearing houses to support customer margin requirements on futures and options on futures positions.
- A portion is held at commodities clearing banks/brokers in accounts identified as segregated for the benefit of IB’s customers to support customer margin requirements.
- As prescribed by commodities regulations, customer funds are subject to real-time protection. IB performs a detailed reconciliation of customer equity on a daily basis to ensure that customer monies are properly segregated. This computation is submitted to regulators daily.
Click below for the Interactive Brokers Firm Specific Disclosure Document required by CFTC Rule 1.55(k).