Segregated account, what is it and how necessary is it, brokers with similar accounts
A segregated account is a bank account that differs from a regular account in that it stores funds allocated for specific purposes.
This may be an account that holds money for specific purposes or obligations, such as an account for paying taxes, an account for holding customer funds at a financial institution, or an account for stock trading.
Very often in the description of the advantages of a Forex broker there is a note that the company also provides a service - “Segregated accounts”, what is this service and what advantages does it give the trader over regular accounts?
A segregated account in exchange trading is a type of trader’s deposit in which part of the funds is stored outside the brokerage company, which significantly reduces the client’s operational risks.
That is, for example, you plan to trade an amount of $200,000, open a segregated account, enter into an agreement with the company and deposit only half of the amount of $100,000 into your deposit.
At the same time, the entire amount of $200,000 is available for trading; the remaining funds remain in your bank account.
That is, in essence, you receive money for trading secured by your bank deposit, the amount of funds received will be equal to the amount in the bank account.
Moreover, when using a segregated account, you can also use full leverage without any special restrictions. Receive available bonuses, take part in various promotions conducted by the broker.
True, there are some nuances when working according to such a scheme, firstly, this concerns limiting the amount of losses on a brokerage account.
Many companies require that if significant losses occur, the client adds money to the deposit.
For example, you have $100,000 on your trader’s deposit, a similar amount in a segregated bank account, losses have reached 15,000, you need to replenish the account with the same amount within a certain time.
As a rule, the terms of replenishment are agreed upon when concluding a service agreement.
What does a Segregated account give to a trader?
In the event of a broker's bankruptcy (and this happens), you do not lose funds in your bank account, so to speak, additional insurance in case of unforeseen circumstances:
If necessary, you can almost instantly gain access to your money, rather than waiting for the broker to execute a withdrawal request.
On deposits in the bank, you receive additional income in the form of interest every month.
Also, many companies often allow their clients to freely manage money, the main thing is that the required amount is again in the bank account by a certain date.
Segregated accounts are mainly intended for large clients, as they are used for deposits of $50,000 or more.
Is it worth opening this type of account?
It’s definitely worth it, the main thing is that you have a sufficient amount of funds for this. The practice of such accounts is widespread in the West, but in our country it is only beginning to gain momentum.
A similar service is offered by InstaForex Broker .