Interactive Broker as a end-stop?

[jscargo]

I thought the same, why would I get invited for shareholders' meeting and stuff frequently, if I don't own the shares.

 

[daxbr]

I thought the same, why would I get invited for shareholders' meeting and stuff frequently, if I don't own the shares.

IB tells them you do but shares still held in street name. You can ask IB to transfer your shares to transfer agent, if you are nervous. They no longer issue paper certificates, regretfully.

 

[Tax Cow]

@KJK

First agreement is between you and IB in which you both agree that you, the customer, own shares.

Second agreement is between IB and the ultimate source of supply for stocks, possibly the stock exchange or order flow agent, in which both parties agree that IB, the customer, owns shares. The stock exchange sees IB as the beneficial owner of stocks and they have no idea of your existence.

But I think it's very nice of them to pass on the non-monetary shareholder perks such as the event invitations to their customers. This shows that at least the companies in question don't stand in the dark.

 

[Silvio]

Stocks held with IB or other discount brokers like Saxo are held "street name", on record belonging to IB or Saxo respectively. They have a pledge towards customers. This means that you can't just migrate to another platform when they go bust, you have to endure the liquidation case. With more elegant brokers like DBS Singapore, you actually own the stock as it's registered in your name in SGX. DBS going under won't affect your SGX stocks and you could just continue trading and profiting via UOB or OCBC the very next day.

Eventually, you'll get your stocks from IB, after liquidators have harvested their share of everyone's portfolio (up to 5%) in legal fees. Considering the size and complexity of IB, it's going to be a several-year case billed hourly by several top law firms.

Odds are the state won't let IB go under. A bail-out is not out of play, unless of course someone like Bernie occupies the WH.

Are you sure about that? I thought if you have a bank account and own bonds\stocks etc your equities are NOT a part of the bank balance sheet and are yours even if the bank implodes.

Any other brokers\banks that do allow you to hold stocks in YOUR name?

 

[Martin Everson]

I thought if you have a bank account and own bonds\stocks etc your equities are NOT a part of the bank balance sheet and are yours even if the bank implodes.

Yes that is case in EU. IB is not a bank.

 

[Silvio]

I see ... what about SwissQuote \ Saxobank \ Dukascopy? They should be a bank as hey do have banking license.

The writing isn't very convincing:
"In the event that a Danish bank (including Saxo Bank) should suspend its payments or go into bankruptcy, client deposits are guaranteed by the Fund with up to EUR 100,000 for cash deposits. Cash deposits are calculated as the net free deposit after deduction of any debt to the bank.

As a general rule, securities will not be affected by the suspension of payment or compulsory winding-up and will be returned to the client. In the event that a Danish bank (including Saxo Bank) is unable to return securities held in safe-custody, administered or managed, the Guarantee Fund will cover with up to EUR 20,000 per client."

Taken from

Protection of retail client funds

Learn more about the retail client protection fund for Saxo Bank investors. Client deposits are guaranteed up to EUR 100,000 for cash deposits.

www.home.saxo

 

[Martin Everson]

I see ... what about SwissQuote \ Saxobank \ Dukascopy? They should be a bank as hey do have banking license.

I would ignore Swissquote or Dukascopy as those are in Switzerland and outside EU rules. However Saxobank is a real bank and assets are ring fenced. You will get back all custody assets and max 100k of any cash deposit in worst case. The 20k is worrying and would suggest that custody assets have been co-mingling, embezzled or bad accounting meaning they cannot return funds to you. I wouldn't want to say this could never happen with Saxobank as it happened with MF Global in US but it a highly unlikely in EU. With IB you get back £85k for everything you hold with them in worst case if you are with their UK entity.

P.S EU rules are just that rules and there is nothing in reality that can stop a bank from breaking custody asset segregation rules sadly just like any other EU rule can be broken so at least you get up to 20k back in that case..lol. .

 

[reesek]

Broker has to segregate client funds

If you disallow margin lending of your cash or stocks its a federal felony to tap into your funds

 

[JustAnotherNomad]

With more elegant brokers like DBS Singapore, you actually own the stock as it's registered in your name in SGX. DBS going under won't affect your SGX stocks and you could just continue trading and profiting via UOB or OCBC the very next day.

How much are their trading fees?
Could it make sense to use an IB account from another country?
I’m outside EU, outside US - which country would IB give me an account in by default? I have heard that if you apply to IB in a specific country (like HK), there’s a big chance you’ll get an account from that country.

I want to trade ETFs and individual stocks to begin with. My country has no tax treaty with the US. To avoid The risk of estate tax and WHT on US dividends, I would prefer Ireland-domiciled ETFs.

Are there better options than IB? I only have ~$100k to invest, not millions.

 

[Tax Cow]

@JustAnotherNomad

Singapore banks' brokerage fees are not that cheap. About 1.5x-2x the fees of IB for Singaporean or HK assets. For buying non-Asian assets, neither HK or SG banks are ideal as the fees can go as high as 4x per round-trip (buy+sell) of discount brokers.

You might want to sign up with IB if you want an avalanche of asset choice around the globe, or with Degiro but more specifically for buying in the EU. Both are cost-wise a better fit. At this portfolio size, fees outweigh the importance of "final touches to asset security"

@ Country of choice, IB gives you an account purely based on your residency. You can't choose your own. There are major compliance considerations to brokerage accounts.

 

[JustAnotherNomad]

Thanks. Are you sure? I have heard you can open an IB HK account by applying there explicitly.

 

[Tax Cow]

Best ask them via support directly. More than one choice could be available to some. I believe that also depends on where you live.

 

[JustAnotherNomad]

IF there is a choice (big if), would it make a difference and would certain jurisdictions be preferable?

 

[Martin Everson]

Broker has to segregate client funds

If you disallow margin lending of your cash or stocks its a federal felony to tap into your funds

Tell that to MF Global.

https://www.cbc.ca/news/business/mf-global-mixed-clients-funds-with-its-own-1.1084595

 

[Tax Cow]

IF there is a choice (big if), would it make a difference and would certain jurisdictions be preferable?

The UK. I'm not too sure of Hong Kong's future as a financial center after 20 years. China will gradually push for Shanghai to replace it and nobody will need the HK dollar nor the jurisdiction itself to do business on the mainland.

 

[reesek]

Tell that to MF Global.

https://www.cbc.ca/news/business/mf-global-mixed-clients-funds-with-its-own-1.1084595

Sir, only futures accounts at MF Global were affected

Non-margin stock accounts got 99% recovery