Interactive Brokers

[Ruby]

RazzaDazzla, I'm amazed that anyone would even consider going that way after what has happened to Sonray. There is no guarantee that the Sonray clients will get their shares back, and what is $30mill of insurance? Sonray are in a $46mill hole according to reports. As Judd has said, unless you have a contract note saying the shares are in your name, their ownership will always be open to question.

We have share registries so people can have legal title to their shares and no-one else can touch them.

 

[skc]

RazzaDazzla, I'm amazed that anyone would even consider going that way after what has happened to Sonray. There is no guarantee that the Sonray clients will get their shares back, and what is $30mill of insurance? Sonray are in a $46mill hole according to reports. As Judd has said, unless you have a contract note saying the shares are in your name, their ownership will always be open to question.

We have share registries so people can have legal title to their shares and no-one else can touch them.

The $30m insurance applies to individual accounts. Not sure how that relates to Sunray's case as the insurance is meant to protect IB going bankrupt, and not the introducing broker (i.e. Sunray in this case).

We all own shares and investments not held in our own name - managed funds, super are two examples... so it's not that crazy really.

 

[RazzaDazzla]

I appreciate everyones words of warning, thus why I was asking before I pulled the transfer trigger.

I'd also be interested to hear from anyone that has transferred to IB and has had no problems.

In my mind, biggest immediate concern is the consequences of transferring to IB being deemed as a transfer of ownership as I would be transferring from my individual name of "John Smith" to "Interactive Brokers" which is then holding them on behalf of "John Smith"

EDIT: I tried speaking to IB about this issue, but fair enough, they were unable to give any advice regarding tax etc. They did mention that the shares are held in "street name".
http://www.interactivebrokers.com/en/p.php?f=productsEdu
and http://en.wikipedia.org/wiki/Street_name_securities so I'm looking into this now.

 

[RazzaDazzla]

OK, so from what I understand now, IB holds the shares "In street name" (US Term) or Nominee Account (UK/Aus term).

So I'm now trying to find out if transferring from my name to a nominee account opens any cans of worms re. transferring, CGT etc.

ATO help line is not surprisingly "at peak volume" and therefore can't get through.

 

[RazzaDazzla]

my goodness! I am on hold after supposedly running my question past someone in the CG team at ATO.

I briefly explained my question and they didn't even know what CHESS was. This is going to be a pain in the bum to get to the bottom of.

Finally got through to a very helpful gentleman in "Access to Experts Capital Gains Tax".
He understood what I was talking about. He suggested I fill in an ATO Private Binding Ruling form and get a ruling from the ATO. He suspected that it might trigger a CG event since I would effectiely not be the owner of the shares any more. Though in saying that; as I would be the sole beneficiary, he suspected that the ATO may not view it as a CGT event.

Is there any pitfalls to submitting one of these Private Binding Ruling forms? Will by name forever be black marked on the ATO computers?

Would I be better off doing this through my tax accountant? or is it something I can do myself and then pass on any rulings to my tax accountant?

 

[professor_frink]

RazzaDazzla, I'm amazed that anyone would even consider going that way after what has happened to Sonray. There is no guarantee that the Sonray clients will get their shares back, and what is $30mill of insurance? Sonray are in a $46mill hole according to reports. As Judd has said, unless you have a contract note saying the shares are in your name, their ownership will always be open to question.

We have share registries so people can have legal title to their shares and no-one else can touch them.

weren't sonray primarily a cfd provider?

 

[Judd]

professor_frink,

As I understand it, and I only know what I have read mainly from media sources, Sonray was both a referring broker and a CFD provider/market maker.

From the broker side, the shares were held in the company's omnibus account, ie they were in the name of Sonray, with those that actually stumping up the dosh to purchase the shares, underlying beneficiaries but not actually the shareholders. That is why the Administrator, called in by the company directors, ceased all assets held in the name of the company. That is why those who did purchase shares are outraged to find that, as a consequence, they are now unsecured creditors. If people don't like this arrangement, then pressure your local State and Federal MP's to change the law. Don't just whinge about it. Set up "We Was Robbed" Committees by all means but the primary matter should be an alteration to the law to make it very clear who actually owns the shares.

There are apparently, media stories of couples, having lost superannuation money, decided to invest their life savings in shares through Sonray and borrowed against their house to do so [Groan - Another one!] There are also rumours that one investor has so far lost $20M of his funds with Sonray as a result of it going into administration. (Administration is costly and a pain. Just to secure a pub in Tasmania required a team of four to fly in the night before to secure the assets and that team had to be paid and their costs covered.)

As for the CFD group, the cash in those segregated accounts, which really are just ledger entries as amounts owed, ie creditors, is also now in the hands of the Administrators. And

"If there is a deficit in the segregated account and in the unlikely event that Sonray becomes insolvent before it makes up the deficit in the segregated account, then you will be an unsecured creditor of Sonray in relation to the balance of any monies owing to you from the segregated account."

RazzaDazzla, the very fact that you are raising issues means you have a problem to solve and are apparently uncomfortable with the situation. Only you can resolve those problems, which may be actual or potential ones. No one on this forum can do it for you. Only you can satisfy yourself whether you're comfortable with IB, its financial soundness, its insurance backup or whatever other issues you're concerned about. If it provides you with peace of mind, get professional tax and legal advice. It may be worth the cost.

I have been accused, to my face by the way, of being callous to those who have lost money. It's not true as I know the feeling having had to sell various assets to expunge a six figure debt. It hurts, it's sad, it's painful, it places stress on the family but that's life and the consequence if you make bad financial and investment decisions. Yet I was never in danger of losing my home or other assets due to establishing various defensive buffers around them. Now it frustrates me no end when I hear and read of stories where people enter into financial arrangements placing their life savings or hard earned at risk. I couldn't, and wouldn't, be a financial councilor or planner for quids.

And on litigation issues, enter it with trepidation. Lawyer joke: One lawyer in town; starvation. Two lawyers in town; prosperity. And they were not referring to the client's prosperity. The We was wronged approach does not guarantee success in the courts.

 

[Ruby]

weren't sonray primarily a cfd provider?

No, you could also buy shares through Sonray, and a lot of people did.......... but aren't we in the wrong thread?

 

[professor_frink]

Judd, thanks for filling me in a little more

No, you could also buy shares through Sonray, and a lot of people did.......... but aren't we in the wrong thread?

Well you did bring Sonray into this!

Still not sure how you could warn Razz about IB and compare the failure of a very, very small player in what is essentially a small market, one that dealt in OTC products and operates in a country with somewhat relaxed laws about this kind of thing, with one of the biggest brokers in the US, with assets of over $20 billion(last time I checked), and who operate in an environment that's extremely well regulated - lehman clients in the US didn't go under when the company did, and I'm pretty sure most of the refco futures clients still had accounts after they went down(spot forex clients didn't fare too well from what I remember).

 

[Ruby]

Oh yes, so I did! Apologies.

 

[Julia]

I'm considering transferring my current CHESS sponsored holdings to IB. This will give me the advantage of being able to use the equity in these holdings for trading.

Question though; my understanding is that with IB the shares are owned/held by IB on my behalf/in trust for me. So my name is not on any company share registries.

That would be enough to deter me for a start.
RazzaDazzla, who are you with at present, and why are you considering moving to IB?

 

[malachii]

Question though; my understanding is that with IB the shares are owned/held by IB on my behalf/in trust for me. So my name is not on any company share registries.

So if IB went belly up like Sonray; do I wave good bye to my shares?

This is what has always worried me about IB and why I wont use them. Sure they are a bit cheaper than others but when it all goes pear shaped.......

As the saying goes - "If you cant hold them you dont own them". Just ask a Sonray client, Opes Prime client or one of the many other combination investment/broker/advisors that have gone broke recently and taken other people's $$$$$ with them, never to be seen again!

malachii

 

[professor_frink]

This is what has always worried me about IB and why I wont use them. Sure they are a bit cheaper than others but when it all goes pear shaped.......

As the saying goes - "If you cant hold them you dont own them". Just ask a Sonray client, Opes Prime client or one of the many other combination investment/broker/advisors that have gone broke recently and taken other people's $$$$$ with them, never to be seen again!

malachii

If it's such a concern, could you point me to a few examples of a US broker dealer going bankrupt and taking the clients money with them

 

[alphaman]

I can see the points about the absolute security of CHESS and the tax implications of ownership transfer, but this comparison of IB with Sonray is just silly.

 

[glenn_r]

Personally I use IB to "trade" ASX and US equities and for my longer term investing I use Commsec and Bell Direct.

As a trading platform IB's TWS is miles ahead of the rest and I don't know of any Aussie broker offering insurance on clients funds as IB do.

 

[Lachlan6]

I use ib and have done so for about three years and would certainly recommend them. However in last night's us trading session I was filled long in a stock at a price which seems to never have existed. After checking about five seperate data sources they all showed me the same information telling me the stock I had bought had never traded at the price ib had filled me at.

I spoke with someone at ib this morning and after having explained the situation he told me that yes the stock had traded at that price and told me to check with bloomberg. Having done so once again it was confirmed that no the stock had not traded at this level and in fact bloomberg matched every other source i had previously looked at. Attempting to explain this to the guy on the phone was near impossible as he kept talking over me and gave me NO opportunity to explain. I requested to speak with someone else but by that stage I had to leave so will call again tonight.

Is anyone else having the same problem? I must say it is a worry being filled at prices which seem to not even exist.

 

[sinner]

I use ib and have done so for about three years and would certainly recommend them. However in last night's us trading session I was filled long in a stock at a price which seems to never have existed. After checking about five seperate data sources they all showed me the same information telling me the stock I had bought had never traded at the price ib had filled me at.

I spoke with someone at ib this morning and after having explained the situation he told me that yes the stock had traded at that price and told me to check with bloomberg. Having done so once again it was confirmed that no the stock had not traded at this level and in fact bloomberg matched every other source i had previously looked at. Attempting to explain this to the guy on the phone was near impossible as he kept talking over me and gave me NO opportunity to explain. I requested to speak with someone else but by that stage I had to leave so will call again tonight.

Is anyone else having the same problem? I must say it is a worry being filled at prices which seem to not even exist.

US equity market seems to be extremely broken due to HFT. Was this you, Lach? :

http://www.zerohedge.com/article/apc-halted-200-shares-trade-100000

 

[skyQuake]

I use ib and have done so for about three years and would certainly recommend them. However in last night's us trading session I was filled long in a stock at a price which seems to never have existed. After checking about five seperate data sources they all showed me the same information telling me the stock I had bought had never traded at the price ib had filled me at.

I spoke with someone at ib this morning and after having explained the situation he told me that yes the stock had traded at that price and told me to check with bloomberg. Having done so once again it was confirmed that no the stock had not traded at this level and in fact bloomberg matched every other source i had previously looked at. Attempting to explain this to the guy on the phone was near impossible as he kept talking over me and gave me NO opportunity to explain. I requested to speak with someone else but by that stage I had to leave so will call again tonight.

Is anyone else having the same problem? I must say it is a worry being filled at prices which seem to not even exist.

Was it a marketmaker stock eg. MML LN?
Seems strange that IB would do this; was it a limit or mkt order?

 

[Lachlan6]

Hi Skyquake.

It was a stop limit order and the stock was ABCO; Stop Limit @ $42.21 and filled at $42.61.

 

[alphaman]

I spoke with someone at ib this morning and after having explained the situation he told me that yes the stock had traded at that price and told me to check with bloomberg.

Why did he ask you to check with Bloomberg? Even IB's own TWS does not show $42.61.

I've noticed that sometimes TWS shows price spikes that are not reported by sites such as Yahoo Finance. But your problem is clearly different.