[TheDude]

Originally Posted by maxr »

What about the guy who uses the maximum available trading leverage (short of being at risk of margin calls) in order to reduce the 'fiscal risk' (ie of his broker going bust) by parking the majority of his trading fund in a safe regulated bank account? In UK, bank accounts are government guaranteed to £50K per institution - so If I were (hypothetical example with flaws, but it'll do for illustration) to trade £1K on leverage with an unregulated FX or spread betting company based in say Malta, and leave £49K in a UK bank, only £1K is at 'fiscal risk'. By doing so I'd almost certainly decrease my overall risk (particularly at the moment) compared to placing my entire trading fund with that broker, then trading low leverage in my account.

Max

You're wrong! You say you're hypothetical argument has flaws. It doesn't at all. It is spot on and well made.

This is what REAL money management is about, and exactly how professionals view the situation. brokerage accounts dont pay out interest, so why should anyone want to leave anymore than necessary to manage positions? this is why funds will deposit interest bearing paper as margin with their clearing firm/broker so they are earning interest on their margin as well. The risk concept which you intelligently put forward is another facet of shrewd risk management and money management.

Afterall, when you deposit your money with a broker, does anyone really think he keeps it nice and safe under lock and key? Nope. It goes straight into the overnight or bond market to earn the broker free money. This is where a lot of brokers make a good % of their income.

[TheDude]

Originally Posted by MadMarketScientist »

-- I believe fxdd is holding them with Chase in New York.

MMS

LOL
Chase
1 Plazza Place
NYC!

I think half the worlds trading accounts are in that place.

[Kiwi]

Originally Posted by MadMarketScientist »

That part I'm not clear on - whether regulation prevents you from taking advantage of what's offered overseas - like you mention with spread betting (or online gambling for example)

I know that up to this point, I know a number of people who have had no problem opening accounts overseas and in many/most cases the funds are still being deposited held in segregated accounts in the U.S. -- I believe fxdd is holding them with Chase in New York.

Not sure if this new regulation somehow prevents this -- or how it could be enforced. I'm sure they would lead you to believe it is not allowed but whether in actuality not sure.

MMS

You do tend to get surprising levels of cooperation. Maybe pressure is involved but they also don't want the hassle of customer problems when it goes wrong.

The spreadbetters (fx buckets by another name) are the most obvious one (try to open an account from the us).

Online pharmacies and Amazon is another one ... try to order drugs that are legal in the US but not approved in Australia for Aus and they won't take your order.

So, if you get draconian laws in the US you might be surprised, given the linkages in these organizations at their willingness to exclude you guys from overseas operations.