When placing your money with a broker, you need to make sure your broker is secure and can endure through good and bad times. The financial statements of Interactive Brokers LLC are available on our website for your review.
Note that Interactive Brokers LLC and its affiliates are owned by Interactive Brokers Group (IBG LLC).
Client money is segregated in special bank or custody accounts, which are designated for the exclusive benefit of clients of IBKR. This protection (the SEC term is "reserve" and the CFTC term is "segregation") is a core principle of securities and commodities brokerage. By properly segregating the client's assets, if no money or stock is borrowed and no futures positions are held by the client, then the client's assets are available to be returned to the client in the event of a default by or bankruptcy of the broker.
A portion of client funds are typically invested in U.S. Treasury securities. Although permitted by CFTC regulations, given the credit concerns over foreign sovereign debt IBKR does not currently invest any client money in money market funds.
As a practice, IBKR holds an excess amount of its own money in these reserve and segregated accounts to ensure that there is more than enough cash to protect all clients.
Securities client money is protected as follows:
Current SEC regulations require broker-dealers to perform a detailed reconciliation of client money and securities (known as the "reserve computation") at least weekly to ensure that client monies are properly segregated from the broker-dealer's own funds. In order to further enhance our protection of our clients' assets, Interactive Brokers sought and received approval from FINRA (the Financial Industry Regulatory Authority), to perform and report the reserve computation on a daily basis, instead of once per week. IBKR initiated daily computations in December 2011 along with daily adjustments of the money set aside in safekeeping for our clients. Reconciling our accounts and client reserves daily instead of weekly is just another way that Interactive Brokers seeks to provide state-of-the-art protection for our clients.
Client-owned, fully-paid securities are protected in accounts at depositories and custodians that are specifically identified for the exclusive benefit of clients. IBKR reconciles positions in securities owned by clients daily to ensure that these securities have been received at the depositories and custodians.
Commodities client money is protected as follows:
Click below for the Interactive Brokers Firm Specific Disclosure Document required by CFTC Rule 1.55(k).
Interactive Brokers LLC Firm Specific Disclosure Document pursuant to CFTC Rule 1.55(k) and NFA Rule 2-36(n)
For clients who borrow money from IBKR to purchase securities, IBKR is permitted by securities regulations to utilize for financing purposes up to 140% of the loan value of the stock these clients hold with IBKR. In simple terms, IBKR borrows money from a third party (such as a bank or broker-dealer), using the client's margin stock as collateral, and it lends those funds to the client to finance the client's margin purchases. Typically, IBKR lends out a small portion of the total stock it is permitted to lend out. When IBKR lends clients' stock, it must put additional money into the special reserve accounts set aside for the benefit of clients.
Under the Insured Bank Deposit Sweep Program, eligible IBKR clients can obtain up to $2,500,000 of FDIC insurance in addition to the existing $250,000 SIPC coverage for total coverage of $2,750,000. IBKR sweeps each participating client's free credit balances daily to one or more banks, up to $246,500 per bank, allowing for the accrual of interest and keeping within the FDIC protected threshold. Cash balances above $2,750,000 remain subject to safeguarding under the SEC's Customer Protection Rule 15c3-3, backed by the firm's equity capital, which exceeds $8.5 billion.
Click here for more information about the Insured Bank Deposit Sweep Program and its benefits.