T, when you sell short, it means your broker sell short on your behalf (since you are not alowed to trade yoself as one without a seat). They get money in cash in three days' settlement and keep it invested in MM and collect MM interest, whether they give anything to you or not, or, some brokers can even charge you for fake margin which is your cash anyway. So, there is nothing left to collect if stock goes to zero. Some even used this fact to not to pay income taxes since they never closed the transaction, the new tax laws made this practice illegal (i.e., one has to pay taxes on short sales when stock subsequently becomes worthless and needn't be bought back.)
OTOH, if your broker is bunkrupt, you get your assets only within insurance limits, and then only after a while. Assuming that insurance Co. is not bunkrupt too. Cash balance insurance brokers carry is not too huge usually. And, a broker is much more likely to go bust than exchange or clearing Corp. (stocks are cleared too).
Treasuries carried at banks (not brokers) and bank balances up to 100k per bank are most safe.
Joe |
