Wed 26 Mar 2008
Important: Aussie Broker Retraction
Posted by ray under Miscellaneous
An important announcement: In an ealrier blog, I made the statement that clients of FX brokers were protected in Australia against broker malfeasance. I have received advice that this is no longer the case. There is NO PROTECTION should a broker fail to segregate accounts. So there is no advantage opening an Aussie FX account.
The futures side may be better or worse than the US. As I understand it, the US position limits any claim to US$500K. The Aussie position is the maximum claim is A$100M. So if the total claims are less than A$100M, you will receive full refund; if the claims exceed A$100M, then we receive a pro-rata refund.
In these days of high volatility, I see my job as ensuring that I lose capital only because of my trading decisions. In doing this, I face two difficulties:
- Many brokers insist on keeping the base currency in US$. Given my view of the US$, I eliminate from further consideration this group.
- Now that the Aussie protection landscape has changed, I’ll be looking for a broker with a solid reputation that accepts a bank guarantee for margin. This way, my exposure is limited to cash funds I am prepared to lose in the event of broker malfeasance.
March 26th, 2008 at 9:59 am
My say:
For big accounts, the brokers may be prepared to give a bank guarantee; I doubt they will go out of their way to guarantee small accounts as this will mean setting a precedent to guarantee most accounts which are small.
What choice have the small account holders?