An omnibus account is a securities account in which all the shares and assets of several clients are grouped around the same account of the depositary or manager.
Also called global account because it brings together all the values of all customers. The omnibus accounts are created to manage in a more efficient way since they consolidate a bilateral relationship between client and broker.
In the various countries, these accounts are usually regulated by public bodies dependent on the Administrations and indicate when an omnibus account can be set up, preferably when this instrument is essential for the operation of securities in international markets and provided that it meets certain requirements. legal.
Use of bus accounts
This type of account is used primarily in international public debt markets and by specialized brokers. The operation of this type of accounts is as follows:
The securities entity acquires a single account in the name of the company itself and on behalf of the clients, but figuring that it corresponds to third parties, so the company can operate freely but certifying that these resources are owned by clients for whom it works and decide. In that same account, all the movements and operations that the entity makes on behalf of third parties, as well as the possible exit of customers in the event that they want to stop operating, will be reflected.
Advantages and disadvantages of the omnibus account
The main advantages of this type of system correspond to the cost savings that occurs between the broker and the client, eliminating intermediaries and thus increasing profitability. In addition, since the securities are in the name of the entity, they are separated between liabilities and assets of the broker itself, assuming an advantage in the event of bankruptcy of the broker, where the client could recover with hardly any problems as the assets are backed.
The entity assumes the risks of the operations without transferring it to its own clients, which improves the system as a hedging element. In this case and for this purpose, there are online collective investment platforms that use omnibus accounts as the basis for their transactions, and in which they save time and money in investment management.
Of course, there are also downsides. If our funds are in a global or joint account, in situations of financial stress, the brokers (fraudulently) could use those funds to try to save the situation. That is, although legally they cannot do it, there are cases in which it has been done. Therefore, you must trust in the good management of our broker and their good faith. In the case of separate accounts, as opposed to omnibus accounts, this is not possible.
In addition, in the omnibus accounts, the titles are not owned by us, but are in the name of the broker.
Example of the operation of an omnibus account
For example, when buying investment funds, the purchase commission sometimes varies depending on the amount that is purchased.
So if several clients are grouped together, they can exceed the limit set from which commissions are reduced. Assuming that from $ 100,000 the commission is reduced, if we group at least 10 people who want to invest $ 10,000 it will be cheaper than investing each one on their own.
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