Interactive Brokers & Re-hypothecation
Posted: Sat Dec 10, 2011 5:52 am
From page 35 of the the â€œMF Globalâ€
A forum for mechanical system traders.
(Note: Underlined Bold emphasis mine)If you open an account with a commodities broker or even with a stock broker on margin, you sign a document acknowledging the company has the right to use the securities and the cash in your account as collateral against the financing they get from banks to loan to you. In other words, they borrow money from banks at say, 3% to loan to you at say, 6% and pledge your assets against those loans. It's called hypothecation and is perfectly legal.
They can also make investments in their name using your assets. But the investments have to be in something safe, such as Greek government bonds now paying 352% (!!??) That's called re-hypothecation and again, you signed a document when you opened your margin account saying they could do that. It's perfectly legal.
Jon Corzine may go to jail for lying to Congress but he isn't going to jail for stealing your money. What he did was legal
Yeh, it's a dirty job . . . but someones gotta do it!Moto moto wrote: I miss those lazy lunches in summer time of Oz.
Chuck, thanks for the 'heads-up' . . . . 'Panic dial' has been turned up one full notch.rhc wrote:When/If that official denial comes then we can turn up the Panic dial one or two notches
I checked the spreads the other night. In fact I nuked my paper trading account by buying $10k worth of $3 OOTM options "at market". The spread on the longest $3 put was 10c-$1, so I had an immediate paper loss of $10k. Closer expiries were not appreciably better. Paying $1 for $3 worth of bankruptcy protection would cut into my returns significantly.rhc wrote:In fact you hope that these options will always expire worthless. Cost of this 'insurance' is of course tax deductible.