Whether the market as a whole is structured around direct "ownership" of share or via a central well established custody system - it's functionally identical risk. You're counting on rule of law. And not just you - everyone. If it works it works, or it doesn't in which case the global financial system crashes and we've all got bigger problems. Also custody <> ownership.
Nor can any of this seize retirement savings:
>may seize securities used as collateral in lending arrangements with broker-dealers.
i.e. no different from bank seizing your house if your mortgage arrangement blows up.
There is nothing to see here
PS I expanded my question as follows: "Can the depository trust company seize securities used as collateral in lending arrangements with broker-dealers in a financial crisis?". The response contains, "...a systemic crisis triggers specific clearinghouse protections that can override normal operations.".
No, this would be like the bank seizing your house if SOMEONE ELSE'S loan arrangement blows up (specifically your broker's loans from the securities exchange). And yes, this assertion is correct, your securities ownership will be in question if your broker becomes insolvent, especially if it becomes insolvent due to fraud.
But this is just fox news scaring people. They don't even take the scariest laws. If your broker goes bankrupt because it commits tax fraud ... then a much bigger can of worms is opened, which can have even bigger consequences for you.
And it's Fox News, right. Also from the article:
"Lawmakers could also enact new legislation that weakens current consumer safeguards"
Well, yes. In other news: lawmakers could enact legislation that makes it legal to kill your dog.
Is there a better source for this? I couldn't bring myself to click "Read More" after the intro paragraphs had such a terrible framing of the DTC.
Here are some reference links Google Gemini found, though they all point to the same site it looks like:
https://www.dtcc.com/legal/rules-and-procedures
https://www.google.com/search?q=https://www.dtcc.com/-/media...
https://www.dtcc.com/managing-risk/financial-risk-management...
https://www.dtcc.com/-/media/Files/Downloads/legal/policy-an...
There's something not quite connecting fully in your mind here.
Getting financial news from a click bait site, right or left, is a dangerous maneuver. There is a different axis other than left/right that is far more important: true/false.
Your comment is insulting and condescending but not unexpected.
You're welcome to refute the information instead of making assumptions about the trustworthiness of the article based on your obvious unhealthy bias against the article site.
If you are insulted, that was not my intention, it was a simple observation that your comment and behavior did not match up at all with the discussion.
In addition to spreading this misinformation by posting it to HN, you also encouraged self-destructive behavior with very bad financial practices in your comment:
> We have no more 401K or other retirement accounts and do not invest in the stock market, except for a couple share of IBM I bought years ago when I worked there.
> So we're covered as I see it. We only use banks with money in savings, checking and CD accounts.
One of the more fruitful efforts is trying to point out that this destructive info has no basis in reality. This is not about left/right as you tried to incorrectly frame it, this is about basic information hygiene and not letting bad info stand undisputed.
Which isn’t a great position to be in but, it’s worth making a few observations:
1) Even if your stocks went into the bankruptcy waterfall, you would have a very preferential place in that waterfall so you are highly likely to get paid in full. If you’re in the waterfall your claim is settled using all remaining assets of the bank, not just your savings. The people who made loans to them with your savings as collateral would be behind you in the waterfall most importantly, so they wouldn’t get dollar 1 until you were 100% paid in full.
2) To actually be worse off here (even notwithstanding #1) you’re really looking at some hypothetical financial meltdown where the banks go completely out of business and yet somehow your retirement savings are still worth something. It might not be a very reassuring thought but that’s not a very likely scenario is it?
3) When a broker dealer goes bust even if your assets are totally in segregated funds you don’t get paid back for frikkin’ ages. A person I know had Lehman as the prime broker for their hedge fund and they didn’t get access to their assets for I want to say a year or so.
It all comes down to: Margin.
If the market fails, they will give you a margin call. If you don’t have a margin account, your broker didn’t make one for you, then you’re safe.
According to this, this is total FUD. In case of a liquidation, security entitlement holder has priority over secured creditors, who have priority over unsecured creditors.
It is interesting that this setup in which people buy stocks but do not actually own them started in the 1970's and I don't recall ever hearing about it until I saw the story on Fox's site today.
We have no more 401K or other retirement accounts and do not invest in the stock market, except for a couple share of IBM I bought years ago when I worked there.
So we're covered as I see it. We only use banks with money in savings, checking and CD accounts.