How Does the Choice of Account Type Affect a Client's Claim in a Broker Bankruptcy? ⎊ Path

How Does the Choice of Account Type Affect a Client’s Claim in a Broker Bankruptcy?

In a broker bankruptcy, a client with a segregated account has a stronger, more direct claim to their specific assets, as those assets are legally separate from the broker's estate. A client in an omnibus account faces a more complex, drawn-out process, as they must rely on the broker's internal records and may have their claim subject to the general distribution of pooled assets.

Segregated accounts offer a much higher degree of asset protection and faster recovery.

What Is the Difference between a House Account and a Customer Account for Margining?

What Is the Difference between Segregated and Omnibus Accounts in Asset Custody?

How Do “Segregated Accounts” Reduce Counterparty Risk for Institutional Derivatives Traders?

What Is ‘Commingling Risk’ and Why Is It Associated with Omnibus Accounts?

Define the Difference between an Omnibus Account and a Segregated Wallet in Custody

What Regulatory Requirements Often Mandate the Use of Segregated Accounts for Client Funds?

How Does the Process of “Porting” Client Accounts Work during a Member Default?

Explain the Difference between an Omnibus Account and a Segregated Account in the Context of Crypto Prime Brokerage

Glossar

Bankruptcy

Default ⎊ This state signifies a critical failure where a counterparty's obligations exceed their available collateral, often triggered in options or futures trading when losses cannot be covered.

Broker

Delegation ⎊ In the context of decentralized finance, the function of a broker is often delegated to smart contracts or non-custodial execution layers, removing direct counterparty risk.