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This is extremely suspect. If you take my money, and give me a share, in theory I should be the only one exposed to a loss (assuming no leverage). Unless you're

This is extremely suspect. If you take my money, and give me a share, in theory I should be the only one exposed to a loss (assuming no leverage). Unless you're doing something else with my money or my shares. I'm sure many people are buying on leverage, but that doesn't explain why they can't just limit margin buying vs preventing any purchase of the stock.

dcolkitt 6y ago
Shares in the US take 3 days to settle. Technically when you buy a share, and it shows up in your account you don’t have actually own it. The broker is only showing you what you expect to receive. Same for selling a share. Cash from the proceeds will show up in your account, but the broker hasn’t actually received that money from the settlement. You can trade with that cash, only because the broker is extending you credit. This is why you can’t trade more than once every three days in an IRA. Tax exempt accounts can’t be used as collateral for loans.
esoterica 6y ago
That's the abstraction that gets presented to the end-user but it's not how it works under the hood. When trades occur money doesn't change hands immediately, settlement only occurs two days later. The clearing houses require the brokerages to post collateral to ensure that they have the money required to settle the trades. When volatility goes up the clearing houses demand more collateral to deal with the higher risk. If the brokerage doesn't want to post the collateral the clearing houses won't let them trade.