IB protects your money by following a variety of regulatory requirements and then taking a number of other steps that are well beyond the basic requirements. Here are the basics:
The comprehensive U.S. federal regulatory regime that covers securities and futures brokers (and the SIPC insurance regime that covers securities accounts) is designed so that customer assets are protected no matter what happens to the financial fortunes of the broker itself. Since customer assets are segregated and separate from the proprietary assets of the brokerage firm, customer assets are protected even if your brokerage firm itself suffers massive losses or becomes insolvent.
In any event, Interactive Brokers is in an unusually strong position in the current environment. IB is part of the Interactive Brokers Group of companies, which have an aggregate of over $4 billion in equity capital and an investment grade credit rating. We have been in business for over 30 years and we have specifically chosen to avoid the highly risky businesses that are causing so many problems in the markets today:
IB spreads its assets in segregated accounts for the benefit of customers across at least six of the largest banks. IB's customer segregation account at Citibank is used as the "conduit" account for deposits and withdrawals but funds are then spread across these federally-approved depositories, which are continually reviewed by IB's senior management.
Timber Hill and Interactive Brokers LLC are entirely separate broker-dealers and are each separately regulated and capitalized and examined by regulators frequently. IB customer assets are entirely separate from IB's own capital and from Timber Hill's capital and trading operations.
While it is not directly relevant to the protection of IB customer assets, Timber Hill shares the same conservative management philosophy and strong access to capital that IB does. Timber Hill has an unparalleled record of over 30 years of conservative growth and profits.
No. A regulated brokerage firm such as IB cannot prevent you from withdrawing money from your account. Some hedge funds make their customers enter agreements that allow the hedge fund to lock up the customers' investment to prevent a liquidity problem at the hedge fund. Brokerage firms are not allowed to do this (as noted above, customer funds are segregated and separate from the proprietary funds of the broker so that they are always available to the customer).
The only circumstance under which IB would delay a withdrawal from a customer account is if you fail to follow proper security procedures for a withdrawal (for example, by failing to use your security token or password that is designed to protect you from identity theft). If we have information that indicates that your account has been subject to fraud or criminality (like identity theft), we may suspend or delay processing a withdrawal for a reasonable amount of time to investigate the matter. In these cases we are typically in contact with the SEC, the CFTC or another of our regulators about the incident.
In addition to segregating customer assets, providing SIPC coverage (and excess SIPC coverage from Lloyd's of London insurers), maintaining a strong balance sheet and avoiding risky businesses like OTC derivatives, swaps, CDOs and mortgage-backed securities, IB has built state-of-the-art risk management procedures and systems that are based on real-time market data and marking-to-market of customer positions.
Foremost among these systems is the IB "Credit Manager" software. This system examines IB customer accounts continually throughout the trading day and evaluates the value of the account and also evaluates the margin requirements for the account. If an account is under its margin requirement, we generally do not allow the customer to "promise" to pay us in three days. Absent exceptional circumstances, an account must always have sufficient margin, or IB will liquidate the under-margined customer's assets intra-day until the account is back into margin compliance. The IB Credit Manager software with this automatic liquidation feature helps to protect our customers and the capital of the firm itself because IB does not extend "good faith" credit to customers overnight or for one day or two days or three days. IB customers must satisfy their margin obligations up front.
The Credit Manager is critical to you as an IB customer, because it seeks to protect you from the risk inherent in the margined positions of other IB customers, whose assets and liabilities rest in the same segregated customer accounts as yours. If you are a client at another securities or futures broker that gives their clients up to three days to send in margin funds, you share the risk that your fellow clients at that firm might engage in risky trading and not satisfy a margin call, which could cause that other broker's segregated accounts to become under-margined and at risk. IB's Credit Manager and strict margin policies reduce this risk for IB customers.
Yes. Remember that no matter how safe and secure your assets may be at IB, you still face market risk on whatever trades you do. In other words, stocks or futures or options you buy can go up or down in value and none of the above discussion changes any of that. You would do well to protect yourself by trading in a conservative fashion.
Also, please be aware that some of the product classes that you can trade at IB are inherently not subject to the protection of a central clearinghouse (but have different protections). For example, IB offers no-load mutual funds. These are not traded on an exchange or a central clearinghouse but of course they are subject to a comprehensive regulatory regime. Likewise, IB allows you to trade foreign currencies. This market is not subject to a central counterparty clearinghouse. You should take this into account in trading forex products. Finally, IB offers corporate, municipal and treasury bonds and these products may be less liquid than equity products. In addition, bonds are inherently subject to credit (repayment) risk.
Here is some other information:
Multiple accounts maintained in the same name and taxpayer ID number are grouped for purposes of applying the maximum per client protection limits of $500,000 by SIPC and $30 million under Lloyd's supplementary protection. However, if you hold accounts with IB in separate capacities (for example, an account in your name, a trust account of which you are the trustee or a beneficiary, or a joint account), then each account would be protected by SIPC and the supplementary protection up to the stated limits.
IB's supplementary protection from Lloyd's of London is subject to an aggregate loss limit of $150 million. This is the maximum amount available to cover IB's customers in excess of SIPC protection. In the unlikely event of a financial failure of the firm coupled with client assets not being fully recovered, SIPC (or a trustee appointed by the federal courts) would advance funds to each eligible client (for more details visit http://www.SIPC.org). Because most accounts maintain less than $500,000 in net equity, SIPC protection would cover the large majority of customer assets held by IB. In the extremely unlikely event of a total loss of customer assets, the supplementary protection would be needed to cover a relatively small portion of the total net customer equity held by IB. Although possible, it is improbable that the aggregate loss limit would be reached. However, if the supplementary protection fell short of covering all customer assets, the coverage would be allocated on a pro rata basis to the client accounts that required protection.
If your account equity exceeds $100,000 (or US equivalent) and you haven't already received an invitation, you may subscribe by logging into Account Management and selecting the Secure Login System menu item. Other customers may request an invitation by sending an IB Inquiry Ticket through Account Management or contacting the Secure Login System Department at 1- 877- 442-2757, option 6.
Prior to submitting a request we recommend that you verify that the email address listed for your account in Account Management is accurate and that your Internet Service Provider has not routed an email invitation into your spam folder.
There is no charge to participate in the Program, however, if your device is lost, damaged or stolen or if you close your account and fail to return the device, a charge will be assessed to cover its cost. This charge, which is a function of the device provided, ranges from 40.00 – 150.00 USD.
IB strongly urges all customers to participate in the Program, although participation is voluntary. You should be aware, however, that if you choose not to accept the security device and participate IB will not compensate you or credit your account in the event it is compromised by hackers or identity thieves. In addition, if you choose not to get an IB Security Device, please be aware of the following:
Customers choosing not to participate are required execute a Notice and Acknowledgement agreement confirming their understanding and agreement with these terms. To request this agreement please send an IB Inquiry Ticket (Located in Account Management) selecting the main category of "Account Services" and "Security Device: Enrollment/Termination/Replacement" for the secondary category.
Most deliveries can be tracked by obtaining the tracking number provided through the Activate IB Security Device Link in Account Management and then verifying the delivery status using that number and the tracking page on designated shipper's website. In addition, while we make every effort to ensure that your address is current before shipping, you should also verify through Account Management that the address listed for your account is accurate.If either your address or the tracking information is inaccurate, please contact the Secure Login System Hotline at 1 (203) 618-4006.
Yes. The security device does not become operational until: a) you have activated it using the confidential information provided to you at the time you subscribed or b) a specific number of days have elapsed since the device was sent, depending on the type of device. The Bronze device is activated after 14 days; all others are activated after 7 days. Even if the device was intercepted, nobody could access your account without having both your confidential security information and your IB Username and Password.
Once Secure Login Devices have been shipped via regular mail or overnight delivery, users will have fourteen days (for a Bronze device) and seven days (for all other levels of device) by which to activate the device before account access becomes restricted. If you have received your device and are unable to activate it for any reason, including the lapse of this seven or fourteen day period, please contact the Secure Login System Department at 1- 877- 442-2757, option 6.
IB will issue you one of four types of security devices and your Account Management
and Trader Workstation login prompts are synchronized to operate with a specific
device. Instructions for operating these devices are available within Account
Management and through the links below:
Bronze security device
Silver security device
Gold/Platinum security device
Try reloading your browser and logging in again, making sure that you've correctly entered your User Name, password and the Security Code from your device. If you continue to have problems, please contact the Secure Login System Hotline at 1 (203) 618-4006.
As long as you have Internet access and can reach the Interactive Brokers website (www.interactivebrokers.com) your security device should be operational regardless of your physical location.
If you do not have your device but require access to either Account Management or Trader Workstation, please contact the Secure Login System Department at 1- 877- 442-2757, option 6. We will verify your identity and provide you with temporary access.
A common security device can be used to access multiple accounts as long as the user identification of the accounts is identical. To request this functionality log into Account Management and then select the User Management and Secure Login Device Sharing menu options. You may then specify the User Names and passwords of the account for which you would like to share a single device. Please note that for some customers, review and approval by Interactive Brokers staff will be required prior to processing your request.
Joint account holders may request a device by sending an IB Inquiry Ticket through Account Management or contacting the Secure Login System Department at 1- 877- 442-2757, option 6. When sending your Inquiry Ticket, please select the main category of "Account Services" and "Security Device: Enrollment/Termination/Replacement" for the secondary category.
You can either push the button or wait approximately 60 seconds after which time the device will shut off automatically.
The device is designed to withstand the stress from normal handling and use, but is susceptible to damage if exposed to water, extreme temperatures and weight loads or being dropped from excessive heights. The device also contains tamper-proof features which may cause it to malfunction if you attempt to open it.
Our security devices are portable by design so that you can access your account whenever you're away from your home or office. Depending on the device, you may wish to attach it to your key-chain or carry in a wallet or purse. For security purposes we do not recommend storing the device alongside your computer.
For security devices which are battery operated, with the battery designed to last between 3 -5 years. When it begins to run low, a "BATT" message will be displayed at whichpoint you should contact the STP Hotline at 1 (203) 618-4006 for a replacement.
In the event your device is lost, damaged or stolen you should immediately contact the STP Hotline at 1 (203) 618-4006. Once we have verified your identity arrangements will be made to ship you a replacement and provide you with interim access. Also note that IB assesses a charge to cover the cost of lost, damaged or stolen devices. This charge, which is a function of the device provided, ranges from 40.00 – 150.00 USD.
If you close your IB account or end your enrollment in the Secure Login System, please package the IB Security Device securely and return it to Interactive Brokers via regular mail or overnight courier at the following address:
Anyone attempting to log into your account with the device will also need your User Name and password. It is important that you do not affix this sensitive information to your device or share it with anyone. Also remember to contact the STP Hotline at 1 (203) 618-4006 to report the lost device.
Because physical possession of the device is necessary to access your account, the account aggregation services offered by other financial institutions (e.g., Yodlee, CashEdge) will be blocked and may result in restricted access to your account as a result of excessive failed login attempts. As a reminder, the IB Customer Agreement specifically prohibits customers from allowing anyone to access their account unless IB has been notified and agrees to provide such access.
For general questions about the STP program please send an IB Inquiry Ticket (Located in Account Management) or select the Technical Assistance option in the IB phone menu. When sending your Inquiry Ticket, please select the main category of "Account Services" and "Security Device: Enrollment/Termination/Replacement" for the secondary category. If you are enrolled in the Program and unable to access your account, please contact the STP Hotline at 1 (203) 618-4006.