Appreicate that there are previous threads on this but I think the devil is in the details and I’m hoping that these can be shared so we can better assess the counterparty risk (Trading212 mentioned it is extermely low but haven’t provided any rationale to back that up).
102-105% cash collateral MTM daily is all good until you have stocks going up 40x in a day - imagine if that happens systematically across the market for a factor. Short sellers on heavily shorted stocks default and IB customers start a run on the shares on rumours.
Is there a cap on % of securities owned that can be lent out by IB? What kind of stress run-on-the-broker scenario can the arrangement weather? In a case of counterparty default, does IB / Trading212 have an obligation to make whole share owners?