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Among other comments, akaloustian wrote:
> the second broker can not undo trades from your first broker...
Actually, IB says that they can transfer the entering trade
to the secondary broker, so that the whole transaction appears
on the backup company's accounts. It takes a while, but in the
end the IB account winds up unaffected, and any gain or loss
appears in the other account. However, it does mean that you
need enough money in the secondary account to cover anything
you do with IB.
Somehow, this does not really sound like enough protection
to me. What happens if, say, you are long in a losing trade
with IB and sell through the secondary account, and then the
market turns around and heads up again before the secondary
broker gets the entry from IB. My guess for a worst-case
scenario is that you get a margin call you can't cover, and the
secondary broker closes you out at a horrendous loss. Eventually,
they get the entry from IB, but it takes forever to get things straight
so that you dare to trade again.
Now what if one of the brokers screws up the transaction,
so that the entry gets "lost in the mail?"
You see why I'm wondering how often backup is needed.
IB's speed of execution, low commissions, and half-size
margin for day trades (in that order) really appeal to me,
but I'm wondering whether the theoretical risks are anything
I would care to face in reality. If the system "never"
goes down for more than a minute, maybe. If it dies for
an hour every month, forget it!
Owen Davies
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