Brokered CD

Brokered CDs are CDs issued by banks that are made available to the customers of a broker/dealer. The CDs are registered with the Securities and Exchange Commission. The deposits are obligations of the issuing bank, not the broker/dealer. Brokered CDs generally have all the features of CDs available directly from banks, and are eligible for the same FDIC insurance. Usually, FDIC Insurance covers up to $100,000 of principal & interest per customer per banking institution.

Advantages of Brokered CD:
1. Brokered CDs often pay higher rates than CDs from your local bank.
2. These CDs are more liquid than bank CDs because there are no early withdraw penalty, the CDs can be traded on the secondary market before maturity. Brokered CDs often have call options.

Brokered CD does have some hidden risks:
1. Market risk: If you liquidate your CD prior to maturity and trade it on the secondary market, you may lose some money.
2. Call risk: Callable CD's will typically pay a higher interest rate compared to a non-callable CD with the same maturity. If a CD is called, the customer will get back their principal at 100 cents on the dollar and all interest accrued up to the call date.

Actually, I think its better to get the broker to check the value of a Brokered CD on the secondary market and at a lower price.