Is your trading account protected

Is your trading balance protected in a segregated account?

We’ve been through recovering money from an insolvent broker. Our money are placed in a segregated account but that does not mean we can get the money back that quickly like we assumed it to be.

Myth about segregated account

What used to believe by many that money placed in segregated account is well protected. It will be protected if the broker went under but many of such beliefs were tested in the recent 2 international forex broker insolvency cases.

Recovering money from segregated account will take months

We are still in the midst of recovering our money from Alpari-UK 3 months going since the fiasco. All the client funds that flowed from the segregated accounts are now combined and called the client money pool which now is managed by KPMG who are the liquidators for the downed Alpari-UK broker.

As of 8th April 2015, the liquidators are claiming their fees from the client money pool. The total fees are still amounting and KPMG does not have the final figures to how much it will eat up into the client money pool.

Liquidator’s fees eating into money segregated?

It is too early to say where will KPMG claim their fees from. Luckily, the UK regulator insured the traders’ money of up to 50,000 GBP per individual retail investor. As of March 2015, the fees that KPMG released during the AGM for Alpari-UK traders and creditors are 5% of the total money pool (and believe me, the sum is still growing).

In summary, we want you to know having the notion that placing money in a segregated account is safe is not true at all. Solely believing in a broker that promises your money is safe with account segregation is not entirely true then.

Protect your money

Our suggestion is to go with a broker that has a regulator or some sort of insurance arrangement that will insure your trading capital if ever the broker goes under.  Our research shows that the UK regulator FSCS insured traders’ money of up to GBP 50,000 pound and still allow hedging, is a great protection which is the main reason why we can sleep with ease at night knowing that our money can be recovered at a later date.

Some suggestions

We will share with you more of forex brokers that will insure trader’s money on a future date. So watch out for more details on this page. Also, shifting some of your trading from trading fx spot to fx futures is a good direction as futures market is exchange regulated and trading will be halted in times like the extreme market volatility with recent SNB Swiss Bank decision happened in Jan 2015.

Risk will be capped to a certain extent for trading with fx futures compared to fx spot which is OTC with broker or with a network of liquidity providers.

In addition, if you have any constructive feedback, suggestions and ideas to protect trading capital, feel free to share with us and our community by dropping your ideas below.

10 comments

  1. Thanks for sharing with traders how to best protect our hard made money.
    Karol

  2. Thanks for sharing this. I am also in the same boat as you guys. I was a client of Alpari UK & I have my funds stuck with them.

    • Hope we can quickly get our of this situation real soon. And thanks for being part of the community and reading our email.

  3. Hi great info. Yes make sure your account is insured but. Here is Some things we can also do is. Have different broker accounts so your money is not all in one account also make sure to always take a portion of your money out every so often. So if something like this ever happens again all your money won’t be in the Brokers account. Example if you start out with a $3,000.00. Account once you make a additional $3,000.O0 TAKE OUT THE MONEY YOU INVESTED. And now the money you have in the Brokers account is the money you made and now you have some peace of mind and you will not loose your initial investment. This my recommendation too all. Thanks danny v. Happy trading

  4. Zetta21.net

    Thanks for the article. Using regulated and more than one brokerage company is fine at least for smaller account sizes. But what should be done in order to protect bigger accounts? F.e. $1.2 million. It is almost impossible to have 20 brokers under FCA and with FSCS protection.

    • Woow! That is a great problem to have. I don’t have the best answers right now but if I am in your situation, I could trade with fx futures, etf and some stocks. Shift more of your exposures to other trading instruments with lesser degree of leverage.

      You just do not want a few individual with a small capital trading with huge leverage in the market, and events like the swiss bank debacle caused the extreme volatility. Alpari UK has thousands of retail clients but it was just a few traders with massive losses caused the downfall.

      Shift some to lesser leverage financial instruments and choose brokers that are well diversified not strictly fx only and also that are FCA regulated.

      Hope this helps.

  5. Unfortunately the reality is that any money invested anywhere over the longer term is at risk of being lost or stolen through many different unexpected means. Anything from false company reporting, fraud, company mismanagement, terrorist activity, market collapse through recession, governments freezing funds etc. Problems in the world’s financial sector will always remain as long as it is in operation. Just don’t form a too strong attachment to money or it will break your heart when it’s lost – one day! Or as Jesus said the principle at Matthew 6:19 “Stop storing up for yourselves treasures upon the earth, where moth and rust consume, and where thieves break in and steal”.

  6. Admin, thanks. Any advice helps. Though, it’s quite annoying to hear that one had funds at Alpari which was under FCA and it still takes endles amount of time to get money back.

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