It is not about trading - customer's funds are deposited into a bank account of a US financial institution partner under under a name of a trust created by their service provider. Until those funds are "spent" they sit in that account. That account is FDIC ensured to $250k.

Compare this to you depositing money with your brokerage to trade stocks. The account is opened at clearing broker in your name, which means that the SPIC coverage limit is just yours.