Galaxy Ark’s Protection for Clients
Galaxy Ark places great importance on investor protection. We calculate on a daily basis the amount of cash and securities owed to clients, allocate funds specifically to cover these obligations, and maintain a large emergency reserve. Galaxy Ark is an SEC-registered broker-dealer (SEC No: 801-80575) and one of the few broker-dealers that calculates customer reserve requirements daily, whereas the industry standard is weekly or monthly.
Galaxy Ark’s optimized client protection mechanism helps reduce the risk of clients being unable to fully recover their funds in the event of liquidation. At nearly all other broker-dealers, the amount owed to clients is calculated weekly or monthly. This means that funds deposited after the last calculation are at risk, since these firms generally only protect assets deposited up to the last calculation date. Galaxy Ark calculates liabilities to clients every business day and allocates funds accordingly. In an extreme scenario, such as a company wind-down, trustees would find it easier to determine the liabilities owed to each client. In contrast, at other broker-dealers, trustees would have to reconstruct a week’s worth of activity — a process that significantly delays the return of funds, as seen in the Lehman Brothers bankruptcy.
Galaxy Ark applies real-time margin requirements, unlike many peers who calculate risk at the end of the day. If a client’s assets no longer cover the risk of open positions, Galaxy Ark will typically liquidate positions immediately to restore margin compliance. Other brokers may allow risky positions to remain for several days.
These real-time risk margin requirements and automatic liquidation measures substantially reduce the risk of one client’s trading losses impacting others or the firm. In volatile markets, firms that calculate risk only at day’s end expose clients to greater potential losses. Firms that do not implement real-time liquidation are essentially relying on future promises of funding, exposing clients to credit risk from other clients.
Another advantage of holding an account at Galaxy Ark is that we do not maintain proprietary positions. Galaxy Ark purely acts as a facilitator for client trading, without taking directional bets. The two largest broker failures in the past decade — Lehman Brothers and MF Global — were caused by risks from proprietary trading.
Because Galaxy Ark holds no proprietary positions, the risk of client funds being trapped during a bankruptcy is far lower than at brokers who do. Clients also never need to worry about the firm placing proprietary trades against them.
If a client uses margin and requests securities lending (also known as rehypothecation), Galaxy Ark — like all brokers — may lend client securities. However, we allocate funds daily equal to 103% of the market value of any rehypothecated securities. Most brokers only do this weekly.
By setting aside more than the value of rehypothecated securities daily, Galaxy Ark shields clients from risk. Brokers who calculate weekly may leave client funds unprotected mid-week, exposing them to potential losses.
Likewise, for client-owned securities that are not currently in good control locations (a common occurrence known as a segregation deficit), Galaxy Ark sets aside cash daily to cover these positions. Most brokers allow such deficits to persist for days before acting.
By ensuring daily cash coverage of the market value of such securities, Galaxy Ark minimizes client risk. Our clients can be confident that all assets at Galaxy Ark are properly segregated. Many other brokers tolerate such shortfalls for days without implementing protective measures.
Lastly, Galaxy Ark is not affiliated with a bank, whereas most similarly sized brokers are subsidiaries of banks. In the event of a global financial crisis, this independence enables Galaxy Ark to provide a more stable platform for clients.
Broker-dealers affiliated with banks are subject to banking regulators, which can create confusion over asset ownership during bankruptcy. In contrast, as a non-bank-affiliated firm, Galaxy Ark is likely to return client assets more efficiently. Additionally, during a financial crisis, Galaxy Ark’s capital resources are entirely dedicated to supporting its brokerage operations. Bank-affiliated brokers, however, are typically capitalized by their parent banks and operate as non-self-sufficient subsidiaries, creating added risk. In times of crisis, they may compete with their parent bank for capital and liquidity, possibly diverting funds away from brokerage operations, which can hurt clients.
In fact, during past financial turmoil, many clients moved funds from these bank-affiliated brokers into Galaxy Ark, treating us as a safe haven. Thanks to our strong financial standing, Galaxy Ark’s client assets grew 77%, and client cash increased 65% from November 2022 to November 2024.
Account Protection
Galaxy Ark clients’ securities accounts are protected by the Securities Investor Protection Corporation (SIPC) for up to $500,000, including a $250,000 limit for cash.
In addition, under Galaxy Ark’s excess SIPC insurance policy, each securities account receives up to $30 million in additional protection (with a $900,000 cash limit), subject to a firmwide aggregate limit of $150 million.
Please note: Futures and options on futures are not covered.
As with all brokerage firms, this insurance protects against the failure of the broker-dealer, not against losses in the market value of securities.
When determining SIPC coverage, accounts with similar names and titles are combined (e.g., “John and Jane Smith” and “Jane and John Smith”), but accounts with different titles (e.g., “John Smith Individual Account” and “John Smith IRA”) are treated separately.