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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 cance

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.
        SilasX 5y ago
        I still don’t get the model whereby <lock up> is unsafe with client funds but not broker funds. Were you presenting one? Did I miss it? If you weren’t, you’re not really resolving my confusion here.
        gruez 5y ago
        >I still don’t get the model whereby <lock up> is unsafe with client funds but not broker funds. "unsafe" is the wrong word here. That would imply the clearinghouse doesn't think the collateral is as good if it came from the customer rather than the broker. This isn't the case. The requirement to use broker funds is not to protect the clearinghouse, it's to protect the customer in case the clearinghouse seizes the collateral (as they're allowed to do) when things go south. By using broker (or their creditor's funds), the customer's funds aren't at risk.

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.
      - SilasX 5y ago
        I still don’t get the model whereby <lock up> is unsafe with client funds but not broker funds. Were you presenting one? Did I miss it? If you weren’t, you’re not really resolving my confusion here.
        gruez 5y ago
        >I still don’t get the model whereby <lock up> is unsafe with client funds but not broker funds. "unsafe" is the wrong word here. That would imply the clearinghouse doesn't think the collateral is as good if it came from the customer rather than the broker. This isn't the case. The requirement to use broker funds is not to protect the clearinghouse, it's to protect the customer in case the clearinghouse seizes the collateral (as they're allowed to do) when things go south. By using broker (or their creditor's funds), the customer's funds aren't at risk.