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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Madharry who wrote (66356)	1/30/2021 3:14:23 PM
From: E_K_S	Respond to of 78954

OT- more detail how trades are clears and 'Margin' accounts hypothicate their interest to the broker and their 3rd party agents Here is another article explaining the plumbing of the 'back office'. Makes you wonder why we do not have several companies clear trades. It's Not Just Robinhood, Reddit Rebellion Has Clogged Entire Financial System's Plumbing Notice how it all revolves around if the account is a 'Margin' account or a 'cash' account. A margin account, you 'hypothecate' your interests (ie shares) in the company to the broker and his counter-party agents. ---------------------------------------------------------------- “We are concerned about the ability of the market and the clearing systems, through the onslaught of orders, to continue to provide liquidity. And we are concerned about the financial viability of intermediaries and the clearing houses,” he added. “The broker stands between these customers and the clearing house,” said Peterffy. “So when some option holders make money, the clearing house has to give us the money to give it to our customers... "...while other option holders, sellers or buyers on their own side lose money we have to collect money from them and give it to the clearing house. If our customers are unable to pay for their losses we have to put up our own money.” So even if you have a 'Cash' account, your Broker may/could have too much counter-party risk from their margin account clients that may/could collapse the house of cards (otherwise know as leverage). That counterparty might be the client (a HF or individual) or the broker (RH or PB). Depending on where you are in the chain, you have different worries. ------------------------------- FWIW, I changed my main taxable account in 2009 to a 'Cash' Account for the reasons they discussed here and the issues w/ the Lehman Brothers collapse.