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Sri Lanka Equity Forum » Stock Market Talk » If a broker get bankrupt?

If a broker get bankrupt?

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1If a broker get bankrupt? Empty If a broker get bankrupt? on Fri Dec 16, 2011 12:59 am

mark

mark
Expert
Expert
what will happen? Do they have good risk management systems?

2If a broker get bankrupt? Empty Re: If a broker get bankrupt? on Fri Dec 16, 2011 8:50 am

Universalgoal


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
some brokers already bankrupt on customer:D

3If a broker get bankrupt? Empty Re: If a broker get bankrupt? on Fri Dec 16, 2011 8:58 am

sidath perera


Stock Analytic
Stock Analytic
lose your money???

Risk management sys????. My brokers don't seem to be able to give me a portfolio valuation when I want it. many may not even heard what a risk management system is pale

4If a broker get bankrupt? Empty Re: If a broker get bankrupt? on Fri Dec 16, 2011 9:36 am

aj


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Brokers who cry the most for credit relaxations, over regulation, demand EPF should buy junk, this is the work of opposition, blah, blah, blah are the ones who are stuck in heaps of credit and they can go bankrupt if they don't perform some tricks. You should avoid them.

There was a post about questioning the old SEC regulator removal could an attempt to stop a transparent system from being implemented. What if a system like that will show that some of these brokers have several billions credit not accounted for right now. If you look at the history of frauds around the world, what is shown to the outside is a different story from what's gong on inside. Many of the time the crooks get the people to protest 'for them' even though it's the crooks who're stealing from the people.

5If a broker get bankrupt? Empty Re: If a broker get bankrupt? on Fri Dec 16, 2011 11:55 pm

kas

kas
Manager - Equity Analytics
Manager - Equity Analytics

Their licence will be suspended and shares would be transferred to another broker house.

6If a broker get bankrupt? Empty Re: If a broker get bankrupt? on Sat Dec 17, 2011 5:24 am

chamith

chamith
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@kas wrote:
Their licence will be suspended and shares would be transferred to another broker house.

What about the money for those shares transferred ?

7If a broker get bankrupt? Empty Re: If a broker get bankrupt? on Sat Dec 17, 2011 6:46 am

hasi17


Equity Analytic
Equity Analytic
@kas wrote:
Their licence will be suspended and shares would be transferred to another broker house.

But if they are bought on broker made credit, that is there's no real money involved then how does those money get settled? That means broker has bought the share on credit on behalf of the customer. But the payment is settled only by broker's credit. But the broker has gone bankrupt now. Broker has no money to settle his/her debt.

8If a broker get bankrupt? Empty Re: If a broker get bankrupt? on Sat Dec 17, 2011 6:56 am

smallville

smallville
Associate Director - Equity Analytics
Associate Director - Equity Analytics
@hasi17 wrote:
@kas wrote:
Their licence will be suspended and shares would be transferred to another broker house.

But if they are bought on broker made credit, that is there's no real money involved then how does those money get settled? That means broker has bought the share on credit on behalf of the customer. But the payment is settled only by broker's credit. But the broker has gone bankrupt now. Broker has no money to settle his/her debt.

In that case, customer has to settle it either by cash or margin account arrangement I think.. The truth is; I highly doubt the news broker would accept a burden of another broker as eventually it degrades their credit limitations too.

9If a broker get bankrupt? Empty Re: If a broker get bankrupt? on Sat Dec 17, 2011 7:13 am

hasi17


Equity Analytic
Equity Analytic
@smallville wrote:
@hasi17 wrote:
@kas wrote:
Their licence will be suspended and shares would be transferred to another broker house.

But if they are bought on broker made credit, that is there's no real money involved then how does those money get settled? That means broker has bought the share on credit on behalf of the customer. But the payment is settled only by broker's credit. But the broker has gone bankrupt now. Broker has no money to settle his/her debt.

In that case, customer has to settle it either by cash or margin account arrangement I think.. The truth is; I highly doubt the news broker would accept a burden of another broker as eventually it degrades their credit limitations too.

But if the customer is not going to settle the amount - that is most likely because it is the portfolio that he's giving into the broker to force sell if he can't pay. But if the portfolio is not worth the credit owed, and if the other seller is expecting his money from this transaction to settle his purchases which he has stock bought on credit and that credit has to be settled and that stock's seller is waiting for the money of his selling to get money to settle his credit but the even force selling the shares cannot settle enough of the credit because the shares are not worth the price but his seller is waiting for the money to settle his credit.................

10If a broker get bankrupt? Empty Re: If a broker get bankrupt? on Sat Dec 17, 2011 7:55 am

smallville

smallville
Associate Director - Equity Analytics
Associate Director - Equity Analytics
@hasi17 wrote:
But if the customer is not going to settle the amount - that is most likely because it is the portfolio that he's giving into the broker to force sell if he can't pay. But if the portfolio is not worth the credit owed, and if the other seller is expecting his money from this transaction to settle his purchases which he has stock bought on credit and that credit has to be settled and that stock's seller is waiting for the money of his selling to get money to settle his credit but the even force selling the shares cannot settle enough of the credit because the shares are not worth the price but his seller is waiting for the money to settle his credit.................

That's a chain of events which can exist or not.. provided that it occured in a worst case scenario; A force sell can be done for the newly migrated customer's shares (say A) , then broker has to settle the credit dispute with the seller (say B) from his account so that the next chain of events are not disturbed. Settling off a huge amount can even be possible for brokers cuz all customers are not asking for settlements therefore; they can roll the money..

Once the first settlement done, suppose if the seller "B" wanted to settle his purchases to the next seller (say C), then he got 3 days to do that. If the purchase was done by "B" the same day, this cannot be met as seller "C" is expecting the cheque on the same day.

As you can see there are much more complicated situations we come across exploring this bit.. The above is the way that has come to my mind of a transcation chain, I'm not an expert on this matter Wink

What I feel is, somehow or other someone gets hammered in between or a possible delay is expected. I read an article in the forum that CSE is trying to implement a payment system for handling this task in a better way, well.. we have to see how and when its gonna happen and lets hope this will arrive before EOY (next year).

11If a broker get bankrupt? Empty Re: If a broker get bankrupt? on Sat Dec 17, 2011 5:39 pm

chamith

chamith
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Smallville;

I think you are talking about the Delivery Versus Payment (DVP) system. Is that why CSE having all these testing after the trading hours? I heard that they are going to upgrade the system. I wonder if they are going to implement that system from 1st of Jan as soon as they last credit clearance is over.

12If a broker get bankrupt? Empty Re: If a broker get bankrupt? on Sat Dec 17, 2011 5:50 pm

bakapandithaya

bakapandithaya
Vice President - Equity Analytics
Vice President - Equity Analytics
good topic for discuss

13If a broker get bankrupt? Empty Re: If a broker get bankrupt? on Sat Dec 17, 2011 7:14 pm

smallville

smallville
Associate Director - Equity Analytics
Associate Director - Equity Analytics
@chamith wrote:Smallville;

I think you are talking about the Delivery Versus Payment (DVP) system. Is that why CSE having all these testing after the trading hours? I heard that they are going to upgrade the system. I wonder if they are going to implement that system from 1st of Jan as soon as they last credit clearance is over.

Gosh.. Thats the word. Thanks chamith.. Very Happy

I found the folowing topics discussed some time back.. just for recap;

http://forum.srilankaequity.com/t10681-delivery-versus-payment-dvp-on-cse?highlight=Delivery+Versus+Payment

http://www.cse.lk/cmt/upload_cse_announcements/7821317101794_.pdf

14If a broker get bankrupt? Empty Re: If a broker get bankrupt? on Sat Dec 17, 2011 8:35 pm

rijayasooriya

rijayasooriya
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
@kas wrote:
Their licence will be suspended and shares would be transferred to another broker house.
What about the cash ?

15If a broker get bankrupt? Empty Re: If a broker get bankrupt? on Sat Dec 17, 2011 10:59 pm

kas

kas
Manager - Equity Analytics
Manager - Equity Analytics
@rijayasooriya wrote:
@kas wrote:
Their licence will be suspended and shares would be transferred to another broker house.
What about the cash ?


What cash you mean?

16If a broker get bankrupt? Empty Re: If a broker get bankrupt? on Sat Dec 17, 2011 11:05 pm

rijayasooriya

rijayasooriya
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
@kas wrote:
@rijayasooriya wrote:
@kas wrote:
Their licence will be suspended and shares would be transferred to another broker house.
What about the cash ?


What cash you mean?
The amount we have not invested in (meaning available cash for withdrawal in brokers account.)

17If a broker get bankrupt? Empty Re: If a broker get bankrupt? on Sat Dec 17, 2011 11:50 pm

Marketinvest

Marketinvest
Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@rijayasooriya wrote:
@kas wrote:
@rijayasooriya wrote:
@kas wrote:
Their licence will be suspended and shares would be transferred to another broker house.
What about the cash ?


What cash you mean?
The amount we have not invested in (meaning available cash for withdrawal in brokers account.)

ha will have to forget about the uninvested moneys because these firms are private limited companies and if the file for bankruptcy the clearence will be according to debt privilages and also it will only be paid on a propotianate basis. The whole cash cannot be recovered. Further it will be a very slow procedure can take many years to complete. For instance leeman brothers bankruptcy is still going on and settlements are stil being made. These are some payments that will be paid on 2015 -2014 period also. Its is a real bad slow procedure...

18If a broker get bankrupt? Empty Re: If a broker get bankrupt? on Sun Dec 18, 2011 12:53 am

kas

kas
Manager - Equity Analytics
Manager - Equity Analytics
@Marketinvest wrote:
@rijayasooriya wrote:
@kas wrote:
@rijayasooriya wrote:
@kas wrote:
Their licence will be suspended and shares would be transferred to another broker house.
What about the cash ?


What cash you mean?
The amount we have not invested in (meaning available cash for withdrawal in brokers account.)

ha will have to forget about the uninvested moneys because these firms are private limited companies and if the file for bankruptcy the clearence will be according to debt privilages and also it will only be paid on a propotianate basis. The whole cash cannot be recovered. Further it will be a very slow procedure can take many years to complete. For instance leeman brothers bankruptcy is still going on and settlements are stil being made. These are some payments that will be paid on 2015 -2014 period also. Its is a real bad slow procedure...

It's like a dissolution of a company I think,Thanks for the info "Marketinvest"

19If a broker get bankrupt? Empty Re: If a broker get bankrupt? on Sun Dec 18, 2011 8:57 am

hasi17


Equity Analytic
Equity Analytic
This is good read about some hows and whys of the delivery vs. payment systems.
http://www.jksb.keells.lk/newjksb/downloads%5CIntrocuction%20of%20Central%20Counter%20Party.pdf

20If a broker get bankrupt? Empty Re: If a broker get bankrupt? on Sun Dec 18, 2011 12:16 pm

rijayasooriya

rijayasooriya
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
@Marketinvest wrote:
@rijayasooriya wrote:
@kas wrote:
@rijayasooriya wrote:
@kas wrote:
Their licence will be suspended and shares would be transferred to another broker house.
What about the cash ?


What cash you mean?
The amount we have not invested in (meaning available cash for withdrawal in brokers account.)

ha will have to forget about the uninvested moneys because these firms are private limited companies and if the file for bankruptcy the clearence will be according to debt privilages and also it will only be paid on a propotianate basis. The whole cash cannot be recovered. Further it will be a very slow procedure can take many years to complete. For instance leeman brothers bankruptcy is still going on and settlements are stil being made. These are some payments that will be paid on 2015 -2014 period also. Its is a real bad slow procedure...
Thanks Marketinvest.

21If a broker get bankrupt? Empty Re: If a broker get bankrupt? on Sun Dec 18, 2011 1:24 pm

Kumar

Kumar
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
The following link will help to understand the issue more. (may be)
http://www.lawnet.lk/docs/articles/sri_lankan/HTML/CV10.html

22If a broker get bankrupt? Empty Re: If a broker get bankrupt? on Sun Dec 18, 2011 1:48 pm

chamith

chamith
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@hasi17 wrote:This is good read about some hows and whys of the delivery vs. payment systems.
http://www.jksb.keells.lk/newjksb/downloads%5CIntrocuction%20of%20Central%20Counter%20Party.pdf


Wow thts call proper info...
Seems like the liquid asset / margin required by the broker to make a trade will significantly reduce. Brokers will have more margins in their hand than now.

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