3 ms·

Well, hopefully the brokerage’s risk department prevents that! If too many people went bankrupt and owed margin debt and the brokerage went under, the governmen

Well, hopefully the brokerage’s risk department prevents that! If too many people went bankrupt and owed margin debt and the brokerage went under, the government would step in and take custody of securities and cash and get them back to the holders, (at some point) who may or may not take a loss if they’re over SIPCs coverage limits of 250,000 cash and 500,000 of securities.

skohan 6y ago
> Well, hopefully the brokerage’s risk department prevents that! Blind-spots do exist, as we have seen in 2008. I'm not saying that I know better, but we can't take it for granted that these organizations have an accurate assessment of all the risks, especially when they are making record profits.
- quickthrowman 6y ago
  > Blind-spots do exist, as we have seen in 2008. I'm not saying that I know better, but we can't take it for granted that these organizations have an accurate assessment of all the risks, especially when they are making record profits. Absolutely! IB got caught with their pants down when /CL (WTI crude futures contract) went negative in April. Their system used to calculate margin requirements did not take negative contract prices into account, and neither did the trading software. Margin calls were not issued at the proper time, and traders couldn’t see the price or execute a trade on IB while the contract value was negative. Due to the latter, IB ended up absorbing any losses incurred by customers while /CL was negative. They lost around $110 million. https://www.ft.com/content/01ee0794-158f-40c5-8bb9-82cf5d5f314b https://www.ft.com/content/01ee0794-158f-40c5-8bb9-82cf5d5f3... https://www.bloomberg.com/news/articles/2020-05-08/oil-crash-busted-a-broker-s-computers-and-inflicted-huge-losses https://www.bloomberg.com/news/articles/2020-05-08/oil-crash...

3 ms·

Well, hopefully the brokerage’s risk department prevents that! If too many people went bankrupt and owed margin debt and the brokerage went under, the governmen

by quickthrowman 6y ago

skohan 6y ago
> Well, hopefully the brokerage’s risk department prevents that! Blind-spots do exist, as we have seen in 2008. I'm not saying that I know better, but we can't take it for granted that these organizations have an accurate assessment of all the risks, especially when they are making record profits.
- quickthrowman 6y ago
  > Blind-spots do exist, as we have seen in 2008. I'm not saying that I know better, but we can't take it for granted that these organizations have an accurate assessment of all the risks, especially when they are making record profits. Absolutely! IB got caught with their pants down when /CL (WTI crude futures contract) went negative in April. Their system used to calculate margin requirements did not take negative contract prices into account, and neither did the trading software. Margin calls were not issued at the proper time, and traders couldn’t see the price or execute a trade on IB while the contract value was negative. Due to the latter, IB ended up absorbing any losses incurred by customers while /CL was negative. They lost around $110 million. https://www.ft.com/content/01ee0794-158f-40c5-8bb9-82cf5d5f314b https://www.ft.com/content/01ee0794-158f-40c5-8bb9-82cf5d5f3... https://www.bloomberg.com/news/articles/2020-05-08/oil-crash-busted-a-broker-s-computers-and-inflicted-huge-losses https://www.bloomberg.com/news/articles/2020-05-08/oil-crash...