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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?

#41

Post by nayuki »

seaman1921 wrote: post #24
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.

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

Give this woman an award: 03:00 "But, but, can I, if I, Thomas, if I can break in - and we should point out that Interactive Brokers is a sponsor of Bloomberg Radio and Bloomberg TV. So it's not the case that traders were doing anything wrong or illegal. It's just a case of logistically, there were going to be problems, right, in terms of clearinghouses. So that's more an operational problem versus a market problem or traders doing something wrong, correct?"

And Thomas responds: "No, no, no, not correct. So, so short squeezes are illegal. ..."

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

#42

Post by ex3ndr »

peterkouvaris wrote: post #23
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.

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.

CEO of IBKR openly admitted that they halted GME trading "because stock was too expensive" and will open it again once "it would cost 17$". And laughs in between.

In what world this is "ethical"?

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

#43

Post by omgJustTest »

1. Read reviews and documentation. Most brokers ask if it isn’t part of the signup process. 2. “No, on us stock exchanges”. Shorts (or anyone overextended ) will receive a house or margin call. These calls are to ensure contractual obligations on the market are met. The SEC requires brokers to make and report these incidents. Brokers are liable if they do not. Worst case: broker forces sales in overextended account, buys short shares and returns them to you. 2a. Finra protects assets in the case of broker insolvency, (avanza goes bankrupt). Your assets would be insured by the us govt. 2b. The SEC/nyse/others is suppose to make sure markets have trust, otherwise people won’t use the exchange.

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

#44

Post by hrgiger »

oa335 wrote: post #37
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?

They are regulated related by their local authorities US,EU etc... Each country has their own retail protection law, as far as I remember the amount changes from 100k$ up to 800k$. So if I am correct it is not based on transaction but the value of your account.

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

#45

Post by rtlfe »

ex3ndr wrote: post #42
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.

CEO of IBKR openly admitted that they halted GME trading "because stock was too expensive" and will open it again once "it would cost 17$". And laughs in between. In what world this is "ethical"?

How is it not ethical? They're stopping people from losing money buying something that is overpriced.

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

#46

Post by [deleted] »

ex3ndr wrote: post #42
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.

CEO of IBKR openly admitted that they halted GME trading "because stock was too expensive" and will open it again once "it would cost 17$". And laughs in between. In what world this is "ethical"?

[deleted]

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

#47

Post by IgorPartola »

humanlion87 wrote: post #31
IgorPartola wrote: post #29

Earlier quoted context omitted.

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.

Do you have a sense of at least order of magnitude for the interest rates? Like, is this a "up to 0.25% annually" situation or is it something more substantial?

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

#48

Post by throw0101a »

nayuki wrote: post #41
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

Give this woman an award: 03:00 "But, but, can I, if I, Thomas, if I can break in - and we should point out that Interactive Brokers is a sponsor of Bloomberg Radio and Bloomberg TV. So it's not the case that traders were doing anything wrong or illegal. It's just a case of logistically, there were going to be problems, right, in terms of clearinghouses. So that's more an operational problem versus a market problem o…

That's some inside baseball observation by her. See NSCC Procedure XV, on (virtual) page 294/385:

> Each Member of the Corporation, except as otherwise provided in this Procedure, is required to contribute to the Clearing Fund maintained by the Corporation an amount calculated by the Corporation equal to:

* https://www.dtcc.com/~/media/Files/Downloads/legal/rules/nsc...

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

#49

Post by nayuki »

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?

Thomas says a lot of nonsensical things during those 4 minutes. He keeps on continually referring to the trading prices of GameStop, basically belittling the market price of $100~200 and continually insisting that it is a company worth a lot less (somewhere below $50, I forget). Even though he runs a brokerage firm, his personal opinion is very non-neutral and he wants to dictate a market direction.

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

#50

Post by jnurmine »

wodenokoto wrote: post #39
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.

I don't know what you define as insurance, but in this case it's basically something which contains things you can invest or save money to, and you get to name a beneficiary (e.g. your child/grandchild/wife/husband/etc.) who gets the money in case of your death. Plus some other details.

Otherwise it like a "normal" brokerage account, except the tax rules are a bit different, no capital tax on profit but you pay a certain percentage based on the size of the insurance (which has details like in which quartal you moved money in). Dividends are not capital taxed, there's a "template tax". Losses cannot be deducted. Etc.

Anyway, with the lending of your stocks the chance of everything going bad is very, very low, but of course it's still non-zero. I guess some people opt out not because of the inherent risk but because they don't like short selling as a concept.

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