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So, how do they move the stock? Bags of stock certificates on international flights? It seems that shifting stock between business units might incur taxes or

by oxryly1 10y ago

So, how do they move the stock? Bags of stock certificates on international flights? It seems that shifting stock between business units might incur taxes or other regulatory concerns.

jsmeaton 10y ago
As far as I understand it it's a little like transferring electronic funds between accounts. The brokerage or exchange is the actual owner of the shares, but moves them electronicly between various accounts. Which leads to some weird voting rules.
twistedpair 10y ago
Equities and other securities are usually held in street name[1], not the current owner's name, and they are not physically moved around, but rather consolidated at clearinghouses. [1] http://www.investopedia.com/ask/answers/185.asp http://www.investopedia.com/ask/answers/185.asp
JumpCrisscross 10y ago
> So, how do they move the stock? In all likelihood, they never do. Russia Account buys $10MM of Stock in rubles; England Account sells $10MM of Stock in pounds sterling. Presumably England Account sold short, meaning it pays interest on its borrowed stock. Other than that, there is no carrying cost to maintaining the arrangement. Worst case: you deal with it if you're caught in a short squeeze. If these securities were bought on different exchanges, e.g. Russia Account bought the Russia-listed stock and England account bought the UK-listed version, they may never be directly reconcilable. One would have to negotiate "special delivery" off exchange with willing counterparties [1]. Otherwise, one could demand stock certificates in Russia, mail them to the UK, and deposit them in England Account to close out the short position. That seems like a lot of trouble to avoid paying short interest. Worst case: after withdrawing funds from England Account let it default on its short obligation if the price goes up, thus leaving Deutsche Bank to sort out the mess of reconciling England Account's loss with Russia Account's offsetting (hopefully) gain. [1] Actually, doing this on exchange seems sloppy. Sure, you get a bit more liquidity. But that doesn't seem like something you'd be worried about when putting in place a structure you expect to leave be into perpetuity. Doing this in the private, i.e. un-registered securities, markets would leave less of a paper trail and make moving the securities easier.
- prostoalex 10y ago
  > Actually, doing this on exchange seems sloppy. The article does mention how a bunch of these transactions were OTC, earning pennies here and there for Deutsche.
- oxryly1 10y ago
  Do they ever close out their short positions? It seems like they'd quickly wind up borrowing too much for any brokerage to help them take on more...

by oxryly1 10y ago

So, how do they move the stock? Bags of stock certificates on international flights? It seems that shifting stock between business units might incur taxes or other regulatory concerns.

jsmeaton 10y ago

As far as I understand it it's a little like transferring electronic funds between accounts. The brokerage or exchange is the actual owner of the shares, but moves them electronicly between various accounts. Which leads to some weird voting rules.

twistedpair 10y ago

Equities and other securities are usually held in street name[1], not the current owner's name, and they are not physically moved around, but rather consolidated at clearinghouses. [1] http://www.investopedia.com/ask/answers/185.asp http://www.investopedia.com/ask/answers/185.asp

JumpCrisscross 10y ago

> So, how do they move the stock? In all likelihood, they never do. Russia Account buys $10MM of Stock in rubles; England Account sells $10MM of Stock in pounds sterling. Presumably England Account sold short, meaning it pays interest on its borrowed stock. Other than that, there is no carrying cost to maintaining the arrangement. Worst case: you deal with it if you're caught in a short squeeze. If these securities were bought on different exchanges, e.g. Russia Account bought the Russia-listed stock and England account bought the UK-listed version, they may never be directly reconcilable. One would have to negotiate "special delivery" off exchange with willing counterparties [1]. Otherwise, one could demand stock certificates in Russia, mail them to the UK, and deposit them in England Account to close out the short position. That seems like a lot of trouble to avoid paying short interest. Worst case: after withdrawing funds from England Account let it default on its short obligation if the price goes up, thus leaving Deutsche Bank to sort out the mess of reconciling England Account's loss with Russia Account's offsetting (hopefully) gain. [1] Actually, doing this on exchange seems sloppy. Sure, you get a bit more liquidity. But that doesn't seem like something you'd be worried about when putting in place a structure you expect to leave be into perpetuity. Doing this in the private, i.e. un-registered securities, markets would leave less of a paper trail and make moving the securities easier.

prostoalex 10y ago
> Actually, doing this on exchange seems sloppy. The article does mention how a bunch of these transactions were OTC, earning pennies here and there for Deutsche.
oxryly1 10y ago
Do they ever close out their short positions? It seems like they'd quickly wind up borrowing too much for any brokerage to help them take on more...