4 ms·
> So FTX had an 11% leverage ratio, pretty good. A better comparison would be a stock brokerage that took your money to buy specific stocks on your behalf but
by csa 4y ago
> So FTX had an 11% leverage ratio, pretty good.
A better comparison would be a stock brokerage that took your money to buy specific stocks on your behalf but then did something totally different, including “investing” in illiquid assets.
If they had just bought the stock you requested, then they could just liquidate your stock at market price when you said you want to sell.
This was not the situation that FTX was/is in.
Instead, the way FTX allocated money/assets was suspicious (at best) if not flat out irresponsible and deceptive.
Also, FTX was not and is not a bank, and the idea that this is levering in the same way regulated banks lever is laughable.
- drexlspivey 4y agoStock brokerages also offer margin accounts. You send them $5k and you buy stock worth $20k. How do you suppose this happens?
- jcliff 4y agobrokerages need to have cash on hand to loan. they can partner with a bank, or it can come from their own balance sheet or investors, but it's not printed out of thin air.
- aeternum 4y agoIn practice, aren't almost all of them either a bank themselves or partner one or more banks and auto-sweep customer deposits into these 'program banks'? Sure it might be slightly more convoluted, but at the end of the day isn't this still customer deposits funding margin/loans?