Client account holders at Interactive Brokers Singapore would have received this circular that explains the investor protections that are in place if you held an account with IB Singapore.
I think this may be because there is this idea that if your account is under IB Singapore, your securities do not enjoy SIPC protection.
Without the protection, the IB Singapore accounts will look inferior to those who open an IBKR LLC account with the US.
This circular tries to clarify that and also bring to our attention other client value-added protections that we should take note of.
I compiled some notes from the circular as well as the links within the circular for your benefit.
How Do You Tell Whether You Have an Interactive Brokers Singapore or Interactive Brokers US LLC Account?
Some clients may struggle to identify whether they have created an IBSG or IBKR account.
When you log in to Interactive Brokers on your browser, they will designate you to an IB site in a different domain, so you won’t be able to know from the website where your IB account resides.
The easiest way is to go to Reports and create a statement or report. If it shows a Singapore address, then it is an IB Singapore account and if not, it is a US account.
For example, here are two activity statements.
This is the Singapore one:
This is the US one:
Hopefully, this is clear enough for you to distinguish easily.
US Securities Positions in IB Singapore Are Protected by SIPC
There may be a misconception that if you create an account with IBSG, your stocks are not protected by the $500,000 SIPC insurance.
IB wish to clarify this, which you can read more under Client Protection Under IBKR vs Industry Standards.
- Interactive Brokers Singapore Pte Ltd custodize certain securities with IBKR LLC.
- IBKR LLC is licensed by US SEC and is a member of US Securities Investor Protection Corporation (“SIPC”)
- Your securities, cash balance, monies to support a short or option position are customized at IBKR LLC. SIPC protects these. The maximum coverage is $500,000 with a cash sub-limit of $250,000.
- IBKR LLC have also taken up excess SIPC policy with certain underwriters at Lloyd’s of London for additional $30 million with an aggregate limit of $150 million. The cash sub-limit here is $900,000.
- Futures and options on futures are not covered in this insurance.
- SIPC provides protection against failure of a broker-dealer, but not against loss of market value of securities.
- IB Singapore will make a claim on our behalf if in the unlikely event that IBKR LLC fails under SIPC insolvency.
- The above applies to positions held by IBSG at IBKR on behalf of customers but not the accounts open by customers of IBSG who also open with IBKR.
Locations of Securities
Your fully paid-for non-Singaporean SEcurities are customized through IBKR LLC and benefit from US SIPC coverage.
Locations of Cash in our IBSG Accounts
- USD, EUR or other non-local currencies (anything other than SGD or CNH): Leading global banks outside of Singapore such as SCB, Barclays and JPMorgan Chase.
- SGD and CNH: Singapore banks.
Value Added Client Protection that IBKR LLC and IBSG Think You Ought to Know
Here are a few notable ones that I picked out from Client Protection at IBKR versus Industry Standards:
- IBKR determines the money owe to clients and set aside funds to cover their client obligations every business day. The competition determines this only weekly or monthly. Why does this matter? In the unlikely event that IBKR goes down, the trustee can more easily determine what is owed to you. Trustees that work with other brokers will have to re-create last week’s activity (which is what happened at Lehman), and that would delay the remittance of assets.
- IBKR calculates real-time risk margin requirements to client accounts while the industry only apply end-of-day risk margin. If client does not have sufficient assets to cover risky positions, IBKR liquidate them real-time and return the account to margin compliance. Other brokers might be more lax and permit the clients to carry the risk over many days.
- IBKR’s business solely serves its clients and does not do proprietary trading. What you may be most afraid is what brought down well-known broker collapses such as Lehman Brothers and MF Global. The collapse of both firms was caused by the risk generated from proprietary holdings.
- To add on to #3, clients would also not have to fear their broker making proprietary bets against them.
- IB thinks that not being affiliated with any banks will help them. This is because in times of crisis such as during GFC, the bank-affiliate brokers have to compete with other banking affiliates for capital and liquidity. This is why clients were removing funds and equity from bank-affiliated broker-dealers and depositing their assets with IBKR instead.
It is good that Interactive Brokers try to alleviate potential client concerns about the platform risk and how they are safer.
Do note that while the circular pointed out where the cash and security resides, this does not help much if you are thinking in terms of estate tax considerations because:
- Whether your securities are subjected to estate tax depends on the domicile or incorporation of your securities.
- Whether your cash are subjected to estate tax depends on if its in a broker that is domcile or incorporated in US and not where the money is held.
Most likely, IB will not provide much help to figure out so you might need to speak to your own tax adviser.
My Comprehensive Interactive Brokers How-to Guides
Interactive Brokers is a great low-cost, financially strong brokerage platform that can be the standard broker for holding your long-term investments. You can access 150 global exchanges, including exchanges such as Singapore, the US, Hong Kong, London, European and Canada.
You will enjoy cheap commissions and zero minimum recurring platform fees or maintenance fees. Convert your funds to different currencies at near-spot rates, paying a flat US$2 fee.
To get started or become familiar with Interactive Brokers, check out my past articles on how to invest with Interactive Brokers. I hope the guides make your life and investing experience easier and brighter.
How Safe is it to Custodized Your Money at Interactive Brokers? The things they do better than other brokers.
How Safe is it to Custodized Your Money at Interactive Brokers (2)? Financial strength of IB during recent banking crisis and during Great Financial Crisis
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