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Ask HN: Can I trust brokers with my stocks?

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Re: Ask HN: Can I trust brokers with my stocks?

#31

Post by humanlion87 »

IgorPartola wrote: post #29
gerdemb wrote: post #4

Interactive Brokers has a stock lending program and shares half the profits with their customers who opt-in. They are transparent about how it works. (Basically they deposit cash collateral to your account to cover the stocks they’ve lent out). https://ibkr.info/article/1839 I think many other brokers do basically same, but aren’t transparent and don’t share the profits.

What kind of interest does that pay? It seems like a good way to use shares on which you are going long and plan to hold for a while.

It depends on the stock and the current demand for that stock. If you had GME shared during the recent frenzy, you could have earned a lot in interest. But, say you have Google, you won't earn much since there is a lot of shares and lot of people willing to lend.

Re: Ask HN: Can I trust brokers with my stocks?

#32

Post by anonuser123456 »

>I asked the same two questions to my broker (Avanza in Sweden), and they haven't replied after 4 weeks.

Get a new broker. I've had some fairly complex securities questions in the past and my broker (Fidelity) always had someone on the phone to talk it out with or inquire further and get back to me.

Re: Ask HN: Can I trust brokers with my stocks?

#33

Post by austhrow743 »

mortehu wrote: post #26
peterkouvaris wrote: post #23

Earlier quoted context omitted.

Seconding IBKR. I've always viewed them as the most ethical broker and also the one with the highest skill ceiling. They do not sell order flow, they offer programs like the above so you can earn interest when they loan your shares out to other individuals or institutions, and let you get very granular about things like your exchange routing.

They don't sell 100% of their order flow, but their firm 606 disclosure says they send significant amounts to Citadel and Virtu.

Even if they don't receive payment for it, one would certainly hope they're sending their orders to wholesalers and not an exchange. They'd be screwing their customers otherwise.

Re: Ask HN: Can I trust brokers with my stocks?

#34

Post by jdreaver »

mortehu wrote: post #26
peterkouvaris wrote: post #23

Earlier quoted context omitted.

Seconding IBKR. I've always viewed them as the most ethical broker and also the one with the highest skill ceiling. They do not sell order flow, they offer programs like the above so you can earn interest when they loan your shares out to other individuals or institutions, and let you get very granular about things like your exchange routing.

They don't sell 100% of their order flow, but their firm 606 disclosure says they send significant amounts to Citadel and Virtu.

I wonder if that is just limited to IBKR Lite, their commission free platform https://www.interactivebrokers.com/en/index.php?f=45196

Re: Ask HN: Can I trust brokers with my stocks?

#35

Post by delvinj »

mortehu wrote: post #27
seaman1921 wrote: post #24

Earlier quoted context omitted.

You should watch their CEO Thomas Peterffy's interview during the gamestop situation - he basically said "shorting is illegal" and a lot of other such nonsense .. completely lost respect for IB after that, even though I still maintain an account. https://streamable.com/ycdec9

That's a long video. Can you link directly to the nonsensical statement you're referring to?

He says "so short squeezes are illegal" at about 3:30

Re: Ask HN: Can I trust brokers with my stocks?

#36

Post by Waterluvian »

freddie_mercury wrote: post #25
Waterluvian wrote: post #17

Earlier quoted context omitted.

My understanding is that this ability to lend out shares is broadly the default option for services like Robin Hood and TD Ameritrade.

I believe you need to upgrade to the premium Robinhood Gold before they can lend shares. It isn't the default, AFAIK. But a lot of people who post online about trading (selection bias) use Robinhood Gold.

Ahhh thanks. I had heard so many times about this. Everyone on WSB telling everyone to call up and get it disabled.

Re: Ask HN: Can I trust brokers with my stocks?

#37

Post by oa335 »

jmillikin wrote: post #8

The answer varies depending on brokerage, legal jurisdiction, and your account status(es). I wasn't able to find good English-language information on Swedish consumer financial regulation, and I suspect this particular concern is not one that is asked regularly. That said, the following rules of thumb for American brokerages might be of interest: * Securities held in cash accounts are not loaned out without the custo…

Let’s say I have a margin account and own 100 shares of GME. My broker then lends out those shares of GME to a hedge fund. What would have to happen for me to never get my shares back? I assume if the hedge fund goes bankrupt, it’s clearing firm would be on the hook? If the clearing firm also goes bankrupt (which has happened before), then what?

Re: Ask HN: Can I trust brokers with my stocks?

#38

Post by jnurmine »

1. Nordnet and Avanza both do this, but they let you opt out. Specifically to Avanza, if you have stocks in a kapitalförsäkring then you are automatically included and if you don't like this, you need to opt out.

2. Yes, looks like it. Have a look at https://www.avanza.se/konton-lan-prislista/konton/kapitalfor....

(Quick translation from the Avanza link: they have a security worth 105% of the value of the borrowed stocks, so if Morgan Stanley goes bankrupt, Avanza tries to buy the stocks back. If trading is stopped, or stocks cannot be bought back for other reasons, you'd be compensated monetarily.)

Other countries may of course do things differently.

Re: Ask HN: Can I trust brokers with my stocks?

#39

Post by wodenokoto »

jnurmine wrote: post #38

1. Nordnet and Avanza both do this, but they let you opt out. Specifically to Avanza, if you have stocks in a kapitalförsäkring then you are automatically included and if you don't like this, you need to opt out. 2. Yes, looks like it. Have a look at https://www.avanza.se/konton-lan-prislista/konton/kapitalfor... . (Quick translation from the Avanza link: they have a security worth 105% of the value of the borrowed s…

My Swedish isn’t great, but is avanza saying that if you have a capital insurance then they are lending out your stocks ... that doesn’t sound like insurance at all.

Re: Ask HN: Can I trust brokers with my stocks?

#40

Post by simonbarker87 »

anticristi wrote: post #18
simonbarker87 wrote: post #16

I’m not a lawyer but own a number of shares in a number of companies through IG in the UK. Since you don’t really own the shares, the broker (in my case IG) hold them on my behalf in a ledger that simply allocates the shares to me then I imagine they can do what they like with the shares. So long as the money is there when you want to liquidate it then it’s irrelevant to some degree. In the UK the value of the shares…

I have evidence that in Sweden you actually own the shares. I actually got a personal letter (read "paper delivered to my mailbox") from the CEO of SAS AB (the Scandinavian airlines).

Cool, then yes you should definitely care what your brokerage is doing
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