5 ms·

The future price of the stock has nothing to do with anything. If I want a $400 stock, and you agree to sell it to me for $400, it is a done deal, is it not? Th

The future price of the stock has nothing to do with anything. If I want a $400 stock, and you agree to sell it to me for $400, it is a done deal, is it not? The order is filled, regardless of settlement time or future price changes.

gruez 5y ago
>The future price of the stock has nothing to do with anything The quote in my previous comment covers that, specifically: >I am no longer super jazzed to give it to you. I might find a reason not to pay you. The reason might be that I’m bankrupt, from buying all that stock for $400 on Monday.
- ZoomerCretin 5y ago
  Yes, I read it. You can’t cancel an order in settlement because you’re “no longer super jazzed”, else every order where the stock price increased would be cancelled by the seller so they could sell again at the higher price. Do you have any evidence that orders can be cancelled in settlement?
  - gruez 5y ago
    >Do you have any evidence that orders can be cancelled in settlement It's not that they'll show up and say "on second thought I don't want that stock anymore, please cancel my order". It's that they'll go bankrupt in the meantime. This was already mentioned in the original comment. >The reason might be that I’m bankrupt
    - SilasX 5y ago
      The broker doesn’t have some way to credibly lock up the money so the buyer can’t back out, regardless of jazzedness or bankruptcy status?
      - gruez 5y ago
        >The broker doesn’t have some way to credibly lock up the money They do, that's what the collateral is for. From the linked article: >The way that stock markets mostly deal with this risk is a system of clearinghouses. The stock trades are processed through a clearinghouse. The members of the clearinghouse are big brokerage firms—“clearing brokers”—who send trades to the clearinghouses and guarantee them. The clearing brokers post collateral with the clearinghouses: They put up some money to guarantee that they’ll show up to pay off all their settlement obligations. The clearing brokers have customers—institutional investors, smaller brokers—who post collateral with the clearing brokers to guarantee their obligations. The smaller brokers, in turn, have customers of their own—retail traders, etc.—and also have to make sure that, if a customer buys stock on a Monday, she’ll have the cash to pay for it on Wednesday. The catch here seems to be that the broker can't use customer funds for collateral (see my other comments in this thread), so the broker has to come up with the money themselves by drawing on lines of credit. If those lines of credit run dry, then they can't take any more orders.
        SilasX 5y ago
        Right, that’s what’s confusing. To rephrase, I’m hearing that brokers can execute some primitive operation <lock up> which correctly and credibly persuades the financial market that $X is available to settle a transaction. But <lock up> is only a “valid operation” when executed with “the broker’s own funds”. Why? To whom would “locking up $X from broker funds” be a valid operation, but “locking up $X from client funds” wouldn’t be? Your comments are saying “that’s just how it is”, but that’s not a reason. Is it a wholly arbitrary operation handed down from on high that accomplishes nothing? Is it a matter of the financial system not being able to trust client-originating money?
        gruez 5y ago
        >But <lock up> is only a “valid operation” when executed with “the broker’s own funds”. Why? regulations, presumably to protect the retail trader. It was part of dodd-frank. https://twitter.com/kralctrebor/status/1354952686165225478 https://twitter.com/kralctrebor/status/1354952686165225478 >Is it a matter of the financial system not being able to trust client-originating money? Yeah pretty much. If every trader had their funds sitting in one place (with the clearinghouse or the fed), then the clearinghouse wouldn't need a deposit system since they can easily validate whether everyone has the funds.
tedunangst 5y ago
It's a done deal until your $400 doesn't show up two days later, and then what?

gruez 5y ago

>The future price of the stock has nothing to do with anything The quote in my previous comment covers that, specifically: >I am no longer super jazzed to give it to you. I might find a reason not to pay you. The reason might be that I’m bankrupt, from buying all that stock for $400 on Monday.

ZoomerCretin 5y ago
Yes, I read it. You can’t cancel an order in settlement because you’re “no longer super jazzed”, else every order where the stock price increased would be cancelled by the seller so they could sell again at the higher price. Do you have any evidence that orders can be cancelled in settlement?
- gruez 5y ago
  >Do you have any evidence that orders can be cancelled in settlement It's not that they'll show up and say "on second thought I don't want that stock anymore, please cancel my order". It's that they'll go bankrupt in the meantime. This was already mentioned in the original comment. >The reason might be that I’m bankrupt
  - SilasX 5y ago
    The broker doesn’t have some way to credibly lock up the money so the buyer can’t back out, regardless of jazzedness or bankruptcy status?
    - gruez 5y ago
      >The broker doesn’t have some way to credibly lock up the money They do, that's what the collateral is for. From the linked article: >The way that stock markets mostly deal with this risk is a system of clearinghouses. The stock trades are processed through a clearinghouse. The members of the clearinghouse are big brokerage firms—“clearing brokers”—who send trades to the clearinghouses and guarantee them. The clearing brokers post collateral with the clearinghouses: They put up some money to guarantee that they’ll show up to pay off all their settlement obligations. The clearing brokers have customers—institutional investors, smaller brokers—who post collateral with the clearing brokers to guarantee their obligations. The smaller brokers, in turn, have customers of their own—retail traders, etc.—and also have to make sure that, if a customer buys stock on a Monday, she’ll have the cash to pay for it on Wednesday. The catch here seems to be that the broker can't use customer funds for collateral (see my other comments in this thread), so the broker has to come up with the money themselves by drawing on lines of credit. If those lines of credit run dry, then they can't take any more orders.
      - SilasX 5y ago
        Right, that’s what’s confusing. To rephrase, I’m hearing that brokers can execute some primitive operation <lock up> which correctly and credibly persuades the financial market that $X is available to settle a transaction. But <lock up> is only a “valid operation” when executed with “the broker’s own funds”. Why? To whom would “locking up $X from broker funds” be a valid operation, but “locking up $X from client funds” wouldn’t be? Your comments are saying “that’s just how it is”, but that’s not a reason. Is it a wholly arbitrary operation handed down from on high that accomplishes nothing? Is it a matter of the financial system not being able to trust client-originating money?
        gruez 5y ago
        >But <lock up> is only a “valid operation” when executed with “the broker’s own funds”. Why? regulations, presumably to protect the retail trader. It was part of dodd-frank. https://twitter.com/kralctrebor/status/1354952686165225478 https://twitter.com/kralctrebor/status/1354952686165225478 >Is it a matter of the financial system not being able to trust client-originating money? Yeah pretty much. If every trader had their funds sitting in one place (with the clearinghouse or the fed), then the clearinghouse wouldn't need a deposit system since they can easily validate whether everyone has the funds.

tedunangst 5y ago

It's a done deal until your $400 doesn't show up two days later, and then what?