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Client money is segregated in special bank accounts (Client Money Accounts held in Trust with Authorised Deposit-taking Institutions ("ADI")) which are designated for the exclusive benefit of Australian customers of IBKR. This segregation is a requirement of Australian Financial Services License ("AFSL") holders and, Interactive Brokers Australia ("IB Australia"), as an AFSL holder, fully complies with these principles.
By properly segregating the customer's assets, if no money or stock is borrowed and no futures positions are held by the customer, then the customer's assets are available to be returned to the customer in the event of a default by or bankruptcy of the broker.
Client money is NOT invested by IB Australia, and is at all times held in these Client Money Accounts held in Trust. In addition, IB Australia does NOT hold any excess amount of its own money in these Client Money Accounts held in Trust.
For customers who borrow money from IBKR to purchase securities, IBKR is permitted by securities regulations to utilize for financing purposes up to 140% of the loan value of the stock these customers hold with IBKR. In simple terms, IBKR borrows money from a third party (such as a bank or broker-dealer), using the customer's margin stock as collateral, and it lends those funds to the customer to finance the customer's margin purchases. Typically, IBKR lends out a small portion of the total stock it is permitted to lend out. When IBKR lends customers' stock, it must put additional money into the special reserve accounts set aside for the benefit of customers.