Would you prefer a broker that segregates client funds?

[Emibluz]

I often wonder if it is really necessary for a broker to segregate client funds.
Segregated accounts may or mayn't be safe but if they truly are offered & thereby broker isn't able to utilize clients' un-utilized funds then he'd be losing out on the profit he could have made off it, on the other hand, if he was able to make money off those funds then he could be able to offer lower spreads or improve support-staff, management, etc as a way of ploughing back of increased profits.

So such considerations must be made when opting for segregated-accounts, not to mention, looking at how good trustees are, etc
Bottom line being that "interested-parties" aka customers/traders should keep a close eye on broker's financial health (forget the "regulators" or "regulation" ) because there would be no need for segregation if the broker is financially healthy while if he isn't financially healthy then why even put money there even if it was supposedly segregated?
What do you think?

 

[Enivid]

You miss the point, Emibluz. The problem that any company may become financially unhealthy at some moment in time. It is hard to guess that moment when judging as an outsider.

 

[Emibluz]

You miss the point, Emibluz. The problem that any company may become financially unhealthy at some moment in time. It is hard to guess that moment when judging as an outsider.

There is only one thing I am not clear about. How would a trader know if clients' funds associated with a broker is segregated?

 

[fxgermany]

You can never know. You will have to trust the regulation authority, the auditor and the broker itself. If you are willing to invest a substantial amount some brokers work with custodians to ensure segregation of funds, but in that case you will have to trust the custodian.

 

[Emibluz]

You can never know. You will have to trust the regulation authority, the auditor and the broker itself. If you are willing to invest a substantial amount some brokers work with custodians to ensure segregation of funds, but in that case you will have to trust the custodian.

Now this is what is referred to as "Blind Trust". This means that we can also trust unregulated brokers because as it is, both have nothing to present as evidence of account segregation. We just have to trust them.

 

[Emibluz]

You can never know. You will have to trust the regulation authority, the auditor and the broker itself. If you are willing to invest a substantial amount some brokers work with custodians to ensure segregation of funds, but in that case you will have to trust the custodian.

I have good reasons to doubt if most of all these regulated brokers parading about the forex are segregating their accounts. Some trade with clients' monies while maintaining on the outside that clients' monies are never touched. Was it not recently that CFTC sanctioned one of our mighty brokers (name undisclosed) for partnering to transfer clients funds to foreign accounts where they could trade with the money? Then if segregation which is the foundation of regulation can be defied by some licensed brokers, why preach that regulation comes first while choosing a broker?

 

[miles]

I guess we have to trust brokers sometime we dont have to trust them because they can be tricky in their regulations and trading conditions. But we just have watch the type of broker we are using, If It is the right one for us.

 

[tabalo]

I remember some casino don't have the right to manage the player fund because the regulation force them to do that. Casino have to let third-party manage the player fund. I think it's good if a regulated broker do it. But I Know, almost brokers don't do it. They hold the trader fund.

 

[miles]

To me, whether brokers are using client's money or not, we sure of any broker you suggest to use because what matters is that our money should be save at the of end of day. I decided be with my no matter what because I have no problem using them i have comfort with them right from the time i started with them.

 

[Fxpipper]

So far, out of the three brokers I use, Trader's Way and FXCM say that they segregate their funds and as for aplari, a few questions have been raised and yet, no concrete answers which just goes to show you that it is all about "blind faith" in the end..But so far, have had no issues with any of them and don't expect to..

 

[Emibluz]

So far, out of the three brokers I use, Trader's Way and FXCM say that they segregate their funds and as for aplari, a few questions have been raised and yet, no concrete answers which just goes to show you that it is all about "blind faith" in the end..But so far, have had no issues with any of them and don't expect to..

So, if they claim that they are segregate client fund but can't show any proof, it goes to show that they don't. Then if they say are regulated, which ofcourse also involves segregation of client funds, then it also shows that their regulation is just a formality. This is a very strange game that we traders don't know how they are playing it. Yes, blind faith is what you called it.

 

[Jason Rogers]

Then if segregation which is the foundation of regulation can be defied by some licensed brokers, why preach that regulation comes first while choosing a broker?

Good question, Emibluz

The purpose of regulation is to hold brokers accountable. Should traders do their own due diligence when choosing a broker above and beyond checking whether a broker is regulated? Absolutely, but making sure a broker is answerable to some government authority by being regulated is a bare minimum when it comes to the safety of your funds.

Let's take the UK as an example, where the Financial Conduct Authority (FCA) regulates brokers. FCA-regulated brokers are required by UK client money rules to keep client funds segregated. In this case, "segregated" is a legal designation. Should a broker regulated in the UK become insolvent, clients holding funds with that broker would have preferred status as secured creditors in bankruptcy proceedings to get their money back first before any unsecured creditors are paid.

Furthermore, clients with money at UK-regulated brokers are insured for up to £50,000 each by the Financial Services Compensation Scheme in the event their broker becomes insolvent. For brokers regulated in Canada, clients are insured for up to $1 million each by the Canadian Investor Protection Fund.

If a broker is unregulated, it means they are unable or unwilling (which is worse?!) to meet even these minimum standards of financial responsibility and transparency. Below are just some recent examples:

Crown Forex
"Although some people with accounts were still able to get their money out at this early stage, many accounts were not refunded... the company had no authorization from the SFBC for any activity in the financial sector in Switzerland."

Unfortunately, that wasn't the end of the story. A couple of years after going bankrupt, the people from Crown Forex were at it again, this time helping others become unregulated brokers.​

JadeFX
"fraudulently solicited and misappropriated more than $3.2 million from more than 500 customers in the United States and throughout the world to trade forex... None of the defendants has ever been registered with the CFTC."​

You miss the point, Emibluz. The problem that any company may become financially unhealthy at some moment in time. It is hard to guess that moment when judging as an outsider.

That's a great point, Enivid!

The past couple of years have seen the failures of brokers regulated in the UK, the US and Australia. If that has taught us anything, it's that the financial stability of the broker you choose is of the utmost importance. Unfortunately, the vast majority of forex brokers are privately held companies, so it's hard to know the state of their finances. Are they profitable, or are they barely staying afloat? How can you know whether they are safe place to keep your money?

Even if your broker is regulated, you need to ask them the following questions regarding their financial stability.

1. What are your revenues?
2. How profitable is your firm?
3. Do you have a top-tier third party accounting firm auditing your financials?

 

[fxapex]

even if a broker segregates client funds a client might not know it, all that matters is it should be safe and with good brokers, you dont have to worry.

 

[lee.belisar]

I often wonder if it is really necessary for a broker to segregate client funds.
Segregated accounts may or mayn't be safe but if they truly are offered & thereby broker isn't able to utilize clients' un-utilized funds then he'd be losing out on the profit he could have made off it, on the other hand, if he was able to make money off those funds then he could be able to offer lower spreads or improve support-staff, management, etc as a way of ploughing back of increased profits.

So such considerations must be made when opting for segregated-accounts, not to mention, looking at how good trustees are, etc
Bottom line being that "interested-parties" aka customers/traders should keep a close eye on broker's financial health (forget the "regulators" or "regulation" ) because there would be no need for segregation if the broker is financially healthy while if he isn't financially healthy then why even put money there even if it was supposedly segregated?
What do you think?

I believe that it is good to pick a broker that is segregating client funds because in this way you are sure that your fund is at the safe hand and won't be compromised. Of course, you have to do some research and background checks before picking a broker to make sure that you would be selecting the good one.

 

[Emibluz]

I believe that it is good to pick a broker that is segregating client funds because in this way you are sure that your fund is at the safe hand and won't be compromised. Of course, you have to do some research and background checks before picking a broker to make sure that you would be selecting the good one.

The question is: How do you get a broker to show you where and how clients funds are being segregated. Or is enough to put it in front of their website claiming to do so?

 

[dodo]

We traders are just like novice in the forex market when it comes to the deal between broker and trader and i wish we could be aware if fund is segregated or not, it would have being more better for us to know but the most important thing is that our funds should be saved with them whether segregation or not. As far as I'm concern, I'm certain that my money is segregated by my broker and there's always comfort with them.

 

[globalfx]

The question is: How do you get a broker to show you where and how clients funds are being segregated. Or is enough to put it in front of their website claiming to do so?

I never thought about this issue until now. Your thread inspired lots of questions. But I don't care about regulation and segregation of clients funds. I don't trust any broker either. I opened a trading account with a broker that offer good spread and fast withdrawal. I did no bother to check regulation or fund segregation because I know forex is a risky business and these brokers can do whatever they like.

 

[Rockefeller]

Funds have to be segregated. I am only using brokers whose funds are segregated.

 

[globalfx]

Funds have to be segregated. I am only using brokers whose funds are segregated.

Please I too want to know how to find out a broker that segregates clients fund. Or would I just believe what I see on their website? How do we trader confirm this?

 

[alexflemj]

The question is: How do you get a broker to show you where and how clients funds are being segregated. Or is enough to put it in front of their website claiming to do so?

If that broker is regulated, I guess their website content should have been revised by the regulatory body. So if the website says they keep those funds segregated, it better be true or they automatically get in trouble, am I right?