Sweep Account

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Company Filings More Search Options. This Investor Bulletin describes some of the potential risks associated with bank sweep programs and suggests questions you may want to consider asking your broker-dealer to help you decide how to best manage the cash in your brokerage account. Broker-dealers may offer you several options for managing your cash. Other options include leaving cash in the brokerage account, or brokers sweep accounts options cash to one or more money market mutual funds.

This investor alert focuses only on the first option: The terms and conditions of bank sweep programs vary. The protections for cash at a bank primarily will derive from banking laws and regulations, including FDIC deposit insurance.

You should review your brokerage account agreement and statement to determine if you are participating in a bank sweep program for your cash. Beginning in Marchyour broker-dealer must obtain your written consent to brokers sweep accounts options in a bank sweep program for any new account you brokers sweep accounts options. If the description of the bank sweep program is not clear to you, you may want to consider asking your broker-dealer to explain how its bank sweep program works.

You also may want to consider asking your broker-dealer about other options brokers sweep accounts options your cash as well as the return offered, risks and costs of each option. If you decide to change your cash brokers sweep accounts options option, ask your broker-dealer how to do that.

Generally, you may liquidate your bank sweep account at any time and have the proceeds returned brokers sweep accounts options you or placed in your brokerage account. FDIC insurance covers all deposit accounts, including checking and savings accounts, money market deposit accounts and certificates of deposit. You can determine how much cash is in your bank sweep accounts from your brokerage account statements or by contacting your brokerage firm. You should also be aware that most broker-dealers place the responsibility on you to monitor brokers sweep accounts options cash level so that you do not lose FDIC insurance coverage.

If offered by your broker-dealer, you may want to sign up for any alerts or other forms of notification about FDIC insurance coverage levels to enhance your ability to monitor the FDIC insurance protection of your cash. Your broker-dealer may choose the bank s in its bank sweep program for various reasons.

As a result, the bank may not have been chosen solely with your brokers sweep accounts options in mind. You may have a say in where your cash is deposited, and if you have concerns about the relationship brokers sweep accounts options the bank and your broker-dealer, you may wish to investigate another option than the bank sweep program.

One relevant consideration when assessing the health of the bank may be the percentage of deposits derived from concentrated sources such as brokered deposits or one or more bank sweep arrangements. You may want to review bank sweep program details to understand how your broker-dealer, the bank sand any other brokers sweep accounts options of the sweep program get paid for the sweep program.

You can ask your broker-dealer representative to provide you with details of these compensation arrangements. Most broker-dealers keep a portion of the interest paid by the bank s as a fee for providing bank sweep services. This fee reduces the rate of interest you receive on your cash in the bank sweep program.

You can check with your broker-dealer to determine if there are other cash management options available to you that may provide a higher rate of return for your cash. In determining the best option for your cash, please remember to carefully consider the costs, risks and benefits of each option. Securities and Exchange Commission. Investor Alerts and Bulletins. What is a bank sweep program? How do I know if I am participating in a bank sweep program?

Does FDIC insurance cover the cash in bank sweep programs? What relationship does my broker-dealer have with the deposit bank s? Public Information about the health of the bank. The compensation arrangement between the bank and your broker-dealer.

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These regulations further require that all securities transactions be effected and margined in the securities segment of the Universal account and commodities transactions in the commodities segment. Given the regulations and policies which direct the decision to hold positions in one segment vs. Outlined below is a discussion as to the cash sweep options offered, the process for selecting an option as well as selection considerations.

You may then select the radio button alongside the option of your choice and select the Continue button. Your choice will take effect as of the next business day and will remain in effect until a different option has been selected. Note that subject to the trading permission settings noted above, there is no restriction upon when or how often you may change your sweep method. Underlying the IB Universal account are two separate sub-accounts or segments, one for the securities positions and balances which are subject to the customer protection rules of the SEC and another for the commodities positions and balances which are subject to the customer protection rules of the CFTC.

This Universal account structure is designed to minimize the administrative overhead that customers would otherwise be exposed to were they to maintain two distinct accounts e. Do not sweep excess funds — under this election, excess cash does not move from one segment to another unless necessary to:.

Minimize a cash debit balance and therefore interest charges in a given segment. Note that this is the default option and sole option for account holders having only one of securities or commodities trading permissions. Sweep excess funds into my IB securities account — here, cash balances are only held in the commodities segment to the extent necessary to satisfy the current commodities margin requirement. Any cash in excess of the margin requirement, generated as a result of either an increase in cash e.

Note that the account holder must have permissions to trade securities in order to select this option. Sweep excess funds into my IB commodities account — here, cash balances are only held in the securities segment to the extent that they, along with any other securities positions having loan value, are needed to satisfy the current securities margin requirement.

Note that the account holder must have permissions to trade commodities in order to select this option. In these situations the procedure is to first transfer balances denominated in the Base Currency, then USD and then the remaining long currency balances in order of highest to lowest. Accounts which are designated as a Pattern Day Trader and which are subject pre-trade credit check that takes into account the prior as well as current day's equity should pay particular attention to the Selection Considerations section below.

If your Account Management version contains a series of menu options on the left-hand side, select the Account Administration and then Excess Funds Sweep menu options. Regardless of your version, you will be presented with a screen which appears as follows:. While the decision to elect one segment vs. As such, an election to sweep excess funds to the commodities segment will prevent the inclusion of such funds in this calculation, thereby potentially limiting the capacity to enter new orders.

To maximize the use of equity for purposes of entering securities orders, one would need to elect to sweep excess fund to the securities segment. Note that an election to the securities segment will not impair the ability to enter commodities orders as the pattern day trading rules do not apply to such accounts. Insurance — SIPC protection is afforded to assets in the securities segment and there is no commensurate insurance scheme in place for the commodities segment.

Interest Income — all other things being equal, customers are likely to receive the most optimal interest income on long cash balances that have not been partitioned between the securities and commodities segments as they are not aggregated for interest credit purposes since they are subject to distinct segregation pools and reinvestment rules.

This, along with the fact that credits require maintenance of a minimum cash balance and that higher balances are afforded preferential rates are factors to be considered when making a sweep election. Other Relevant Knowledge Base Articles: A Comparison of U.

IB, however, conducts such transactions in the securities segment of the Universal account as this is necessary to provide margin relief between the single stock future and any qualifying stock or option position. For additional information regarding interest calculations including a link to current benchmark interest rates, refer to KB