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I am an experienced stock trader that wants to start trading futures. My
stock accounts are protected by insurance that the broker provides. That
insurance will cover accounts up to $10,000,000. This protects me from
broker insolvency, fraud, etc. I have never seen this type of insurance
provided by futures brokers.
In addition to trading for my own account, I trade for a trust. Because of
my trustee capacity, I must determine the exact method that the broker’s
customer funds are protected against fraud, negligence and insolvency.
I understand that all the exchanges must chip into a fund that is used to pay
off customers that lost funds do to fraud, negligence and insolvency. In
addition, the broker’s are required not to commingle customer funds with
theirs. I am getting a copy of those procedures mailed to me.
DO THESE EXCHANGE AND CFTC PROCEDURES MAKE THE VETERAN FUTURES TRADERS OUT
THERE FEEL SECURE? It doesn’t provide me the same comfort level as the
insurance provided by a stock broker. It is bad enough to suffer bad fills
and the normal risks of futures without this concern. Please don’t respond
by saying that I shouldn’t trade if I can’t withstand the risk. I am willing
to accept losses from my own stupidity and bad fills, but the possibility of
100% of my funds disappearing because of no insurance is a concern. I am
determined to trade futures; therefore, I would appreciate comments on how
one can protect himself from the worst happening.
In addition, futures brokers require the purchase of treasuries instead of
money market funds to cover margin. Can someone give me an idea if the
interest earned from these treasuries would be more or less than that earned
from a money market fund for accounts that have constant oscillations in
margin use?
Thanks in advance.
Russ
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