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Pastimes : Ask Mohan about the Market -- Ignore unavailable to you. Want to Upgrade?

To: Tommaso who wrote (9006)	11/22/1997 7:26:00 PM
From: Rational	Respond to of 18056

Tommaso: But is there any chance, for example, that my SPY short would fail to be honored if the market declines? There is a VERY, VERY small probability that it will not be honored. But, I do not expect that to happen, given a very tight payment system. Sankar

To: Tommaso who wrote (9006)	11/22/1997 7:26:00 PM
From: Joseph G.	Read Replies (2) \| Respond to of 18056

T, when you sell short, it means your broker sell short on your behalf (since you are not alowed to trade yoself as one without a seat). They get money in cash in three days' settlement and keep it invested in MM and collect MM interest, whether they give anything to you or not, or, some brokers can even charge you for fake margin which is your cash anyway. So, there is nothing left to collect if stock goes to zero. Some even used this fact to not to pay income taxes since they never closed the transaction, the new tax laws made this practice illegal (i.e., one has to pay taxes on short sales when stock subsequently becomes worthless and needn't be bought back.) OTOH, if your broker is bunkrupt, you get your assets only within insurance limits, and then only after a while. Assuming that insurance Co. is not bunkrupt too. Cash balance insurance brokers carry is not too huge usually. And, a broker is much more likely to go bust than exchange or clearing Corp. (stocks are cleared too). Treasuries carried at banks (not brokers) and bank balances up to 100k per bank are most safe. Joe

To: Tommaso who wrote (9006)	11/22/1997 8:07:00 PM
From: robnhood	Respond to of 18056

Tommaso,,,I have never heard of a stock market wager not paying the other side,,,this is the backbone of the casino,,,has to be,,,that would surely kill the goose,,,would it not?? rrman