Client Protection - Strength and Security

Strength and Security

STRENGTH AND SECURITY

Client Protection

Client Protection at Interactive Brokers Securities Japan Inc.


IBSJ takes a proactive approach to the protection of client assets. IBSJ determines the amount of cash and securities designated for customers daily and segregates funds for the exclusive benefit of customers in a trust bank account specifically indentified as a client segregated account.

IBSJ performs a daily reconciliation of customer money to ensure that customer monies are properly segregated from IBSJ’s own funds. Customer-owned, fully-paid securities are protected in accounts at depositories and custodians that are specifically identified for the exclusive benefit of customers. IBSJ reconciles positions daily in securities owned by customers to ensure that these securities have been received at the depositories and custodians.


IBSJ applies real-time risk margin requirements to customer accounts. If a customer is deemed to have insufficient assets to cover the risk of their open positions, IBSJ will perform real-time liquidations of their positions to return the account to margin compliance.

IBSJ's real-time risk margin requirement and protective liquidations minimise customers’ exposure to losses attributable to other customers’ trading, and the risk that customer losses pose to IBSJ.


Another benefit of doing business with IBSJ is that it does not carry materially significant proprietary inventory. IBSJ does not make directional bets and only holds proprietary inventory to facilitate client trading on the IBSJ Systematic Internaliser and to facilitate client trading in certain OTC products. Two of the most significant bankruptcies of the past decade (Lehman Brothers and MF Global) were caused by the risk generated from proprietary holdings.

Since IBSJ does not make proprietary bets, the risk of IBSJ going bankrupt and customer funds being tied up in a liquidation is significantly reduced.


Account Protection for the account holders of Interactive Brokers Securities Japan, Inc.


Securities (including foreign securities) and cash (including margins for futures, options, and CFD transactions) deposited by customers with securities firms are considered "customer assets" and are required by the Financial Instruments and Exchange Law to be clearly separated from securities and money held by the securities firms themselves in Japan. Naturally, the Company also manage its customer assets (securities and cash) entrusted to the Company by its customers separately in accordance with the Japanese Financial Instruments and Exchange Law. Note that unsettled open interest in Futures, Options and CFD transactions are not subject to segregation control.

The Company clearly separates the storage locations of "customer securities" and "proprietary securities, etc." held by the Company, and manages the customer securities in a manner that allows the Company to immediately identify which customer holds which securities. The amount of cash deposited with the Company, which is the total amount of cash deposited with the Company minus the amount of cash the Company has advanced for purchases and other amounts that can be deducted from the total amount of cash deposited with the Company for the calculation of the amount to be returned in the event of our bankruptcy ("customer segregated cash"), is kept in the custody of the trust bank designated by the Company. As for cash in foreign currencies, the equivalent amount in Japanese yen is entrusted to the trust bank designated by the Company.

Securities deposited by customers are placed in the custody of a third party (Japan Securities Depository Center, Inc. or a local securities depository in the case of foreign securities). The securities deposited with third parties are kept in segregated storage, and each customer's interest in the securities is immediately identifiable by the customer's own books and records.

As a securities company engaged in the Type I financial instruments business in Japan, the Company is a member of the Japan Investor Protection Fund. The Japan Investor Protection Fund is a fund that provides monetary compensation to customers for the purpose of investor protection in the event that it becomes difficult to return securities or cash entrusted by customers due to the bankruptcy of a financial instruments business operator, etc.

For more information, visit the Japan Investor Protection Fund .

Interactive Brokers Business Continuity Plan

In accordance with applicable regulations, Interactive Brokers ("IBKR") has developed a Business Continuity Plan ("BCP") to assist the firm in promptly addressing and responding to the possibility of a future Significant Business Disruption ("SBD"). This plan is designed to mitigate or eliminate the impacts of SBDs of varying scope.

IBKR's BCP was developed using a risk-based approach to identify critical systems and functions and determine the means by which clients will be provided prompt access to their funds and accounts in the event of an SBD. Additionally, the plan describes resiliency and redundancy controls implemented within the systems infrastructure to minimize the potential adverse effects of a disruption.

IBKR's BCP is designed to restore client access to the systems which service funds and positions within 24 hours of a disruption, although recovery time can vary depending on the nature of the disruption, the specific services that have been disrupted or factors outside of IBKR's control.

To review key elements of IBKR’s BCP, please read our BCP Disclosure.

Disclosures

Interactive Brokers Securities Japan Inc (IBSJ) custodies certain of your securities positions with its US affiliate, Interactive Brokers LLC ("IBLLC"), which is licensed by the US Securities & Exchange Commission and a member of the US Securities Investor Protection Corporation ("SIPC'). To the extent that your securities (or cash balances, to the extent they are acting as margin in support of a short stock or option position carried by IBLLC) are custodied at IBLLC, they are protected by SIPC for a maximum coverage of $500,000 (with a cash sublimit of $250,000) and under Interactive Brokers LLC's excess SIPC policy with certain underwriters at Lloyd's of London for up to an additional $30 million (with a cash sublimit of $900,000) subject to an aggregate limit of $150 million. Futures and options on futures are not covered. This coverage provides protection against failure of a broker-dealer, not against loss of market value of securities. In the unlikely event it should ever become necessary to assert a claim in a SIPC insolvency proceeding as a result of a failure of IBLLC, Interactive Brokers Securities Japan Inc (IBSJ) will make the claim on your behalf.