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This was the biggest issue of the article, if I buy a share with cash I already deposited with broker, the broker will use 100% of that cash to buy the share, w
by Rastonbury 6y ago
This was the biggest issue of the article, if I buy a share with cash I already deposited with broker, the broker will use 100% of that cash to buy the share, whether as margin first or straight paying for the share. Can any explain to me why RH would need to put collateral/margin up for shares bought with successful customer deposits?
The other explanation is that they are running a b-book that is underwater due to the runaway success of GME and have big losses from that.
- tedunangst 6y agoThis has been difficult to find. It seemingly follows from Rule 15c3-3 . https://www.sec.gov/divisions/enforce/customer-protection-rule-initiative.shtml https://www.sec.gov/divisions/enforce/customer-protection-ru... But that's something of a slog to read. The closest I've found is footnote 13 in this rule change, which notes that it was requested to change this requirement. I haven't found anything contradictory. https://www.sec.gov/rules/sro/nscc/2013/34-69302.pdf https://www.sec.gov/rules/sro/nscc/2013/34-69302.pdf
- erik_seaberg 6y agoSo the brokerage is always required to sit on the buyer’s money just in case they can’t readily get the securities or the collateral from the clearinghouse, and the buyer can’t even put up extra money to make sure the transaction can go through. Weird, but good find.