Forex brokers with segregated accounts | Forex segregated accounts
Forex brokers that offer segregated accounts:
What is a segregated account?
Segregated accounts – dedicated client accounts which allow keeping client funds separated (segregated) from the company funds.
Currently US law doesn't allow holding Forex funds in segregated accounts. Oversees brokers, however, are able to offer this option.
Segregated accounts can either be opened in the name of each individual client or can be Joint for all clients. Usually in retail Forex industry it’s going to be the second case (one bank account for all clients, opened in company name), unless negotiated individually for large investors.
The purpose of segregated accounts in Forex
The main purpose of a Forex segregated account is to shield client investments from possible company risks by keeping such investments "unavailable" for the company to be used in the course of their business when facilitating own risks, expenses and obligations. Should the company account become overdrawn, the company or its bank cannot use client funds.
While trading in the Forex market, Forex brokers with no account segregation are able to engage client funds as margin against their own positions which are being opened to hedge against client trades; at the same time, brokers who work based on a segregated account scheme must use own funds to do the same.
Segregated accounts in broker bankruptcy case
In the event bankruptcy, clients’ funds will be treated based on the laws and regulations set for countries in which brokers operate and hold accounts.
In the UK clients’ funds remain protected, neither bank no company liquidators, no its main creditors are eligible to access and be compensated through those funds. Clients will be paid based on a compensation scheme approved according to existing regulatory requirements. It is a duty of each individual investor to inquire about existing compensation schemes available for his broker. As an example, review the compensation scheme for the FSA regulated brokers.
According to the Swiss law, the liquidator mostly appointed by the federal banking commission will rank the client assets as a general unsecured creditor of failed company. Again, this is only relevant when the company goes bankrupt or is put in liquidation.
Before opening an account with any Forex broker, go over Trading Terms & Conditions in the Client Agreement form. It always says about level of protection of client funds and financial liabilities of a broker in case of bankruptcy.