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Ask HN: Can I trust brokers with my stocks?
21–30 of 66 posts
Re: Ask HN: Can I trust brokers with my stocks?
#22IANAL
Technically you could lose shares loaned to short sellers, but it would happen under some pretty extreme circumstances. Basically, the short seller would have to go into default and be unable to return the shares; then, your brokerage would have to also be in default and be unable to buy the shares needed to return them to your account. I have never been in this situation but I think most brokerages would try to offer a cash settlement for the lost shares. If the brokerage is bankrupt and was unable to transfer your account to a solvent brokerage, then, as far as I know, you would be a creditor during the bankruptcy proceeding and would be "first in line" i.e. you would have to be paid before the bond- or stockholders of the company.
To compensate for this sort of risk short sellers must make interest payments, and usually brokers will share the interest payments with the client that they borrowed shares from (and thus the client must know the shares are being loaned).
[EDIT: Looked it up, should have done this beforehand; if your brokerage is in default, you would be entitled to withdraw the collateral the brokerage had deposited for the loaned shared.]
Re: Ask HN: Can I trust brokers with my stocks?
#23Interactive 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.
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.
Re: Ask HN: Can I trust brokers with my stocks?
#24Interactive 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.
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.
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.
Re: Ask HN: Can I trust brokers with my stocks?
#25Disclaimer: IANAL or a financial expert. This information is relevant in the US, but Swedish brokerages may do something similar. In the US, brokers cannot lend out your shares without your knowledge. Brokerage customers can opt into a program called Fully Paid [Securities] Lending, in which the broker pays you a monthly fee to lend your shares out to short sellers. The fee you're paid is higher for securities that a…
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.
Re: Ask HN: Can I trust brokers with my stocks?
#26Interactive 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.
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.
Re: Ask HN: Can I trust brokers with my stocks?
#27Earlier 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.
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?
Re: Ask HN: Can I trust brokers with my stocks?
#28Earlier 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.
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
Naked shorting is illegal
Re: Ask HN: Can I trust brokers with my stocks?
#29Interactive 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.
Re: Ask HN: Can I trust brokers with my stocks?
#30You can opt out/opt in of stock borrowing on Avanza, there’s a setting.