Segregation, negative balances and compensation: scope

The essentials

Segregation, negative-balance protection and compensation schemes are different mechanisms. They do not guarantee profits or eliminate market losses. Scope depends on entity, client classification, product and contract.

Understand the mechanism, not just the definition

These protections address different situations: segregation concerns client funds; negative-balance rules concern certain deficit obligations; compensation schemes address eligible claims. None automatically equals deposit insurance or recovery of market losses. Check entity, client classification, product and exclusions.

Example and verification

Check fund custody, deficit treatment and any applicable compensation scheme separately. Read exceptions. Protections for a European entity's customers do not establish those of an international account.

Worked case, step by step

Material advertises segregated funds and a compensation scheme associated with another group entity. Do not combine those statements into a coverage claim for your account. Use three separate rows and require a contractual reference for each. Undocumented protection for your entity remains unconfirmed, not filled in from another jurisdiction.

What to verify when applying this

Create three fields with document and version rather than a generic safety label. Leave unsupported contractual claims pending. A support promise does not replace a clause.

Practice: verify it in your environment

Learn by observing the process and keeping its data. Complete this practice in demo or using documentation, without sending real orders or adding capital for the exercise. Record differences between the example and your account specifications.

1. Separate protections and record covered and excluded events.
2. Verify that all references concern the same contracting entity.

Test your understanding

Try the question before revealing the answer. Justify the conclusion and its assumptions rather than memorizing a number.