Savvy risk managers don’t tend to use retail brokerages not because of the risk but because other venues suit their operating model better. That said if they w

Savvy risk managers don’t tend to use retail brokerages not because of the risk but because other venues suit their operating model better. That said if they were using Schwab for a long equity position they would not be worried about their shares being used for other creditors payback because the law says it can’t. Share holders have more senior claims than other creditors. Further, even if Schwab was insolvent there is a long chain of custody on equity shares managed by a too big to fail entity (cede) to fall back on. Other kinds of tradable assets don’t have such protections (such as fx futures or even fractional shares) so when trading these risk managers actively do look at the balance sheet of the clearing partners. In many cases that is a too big to fail entity like the CME but clearing default was a hot topic the last time I worked in the space. I don’t know the specifics of LedgerX held crypto but given it’s a cftc regulated exchange and a bankruptcy judge actually having to rule on this, my guess is those tokens do not have the same protections as a google share at Schwab. None of this of course matters for a single btc, that’s not enough to get professional risk management involved and if the crypto space went away tomorrow you’d just move along on losing that. But! For someone wanting to put on a large short (think a Soros style bet) figuring out how to manage the counterparty risk is a big part of the trade and it would be very common to not put that trade on with an exchange or otc desk headquartered in the country whose currency you are shorting. Precisely because you’d be worried that the basis for your short thesis would cause contagion that collapsed your counterpart. I can see how that thinking could be extended to an exchange whose business was focused on crypto. Again, I don’t know the crypto space well enough to take have a meaningful opinion.