SEC Directive

hawklk · 1 SEC Directive Tue Aug 16, 2011 2:45 pm

hawklk

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According to the directive force selling will come into effect end of each month or as soon as the broker looses it's favorable liquid limit. Am I correct?

Can we assume brokers have favorable liquid assets? If not force selling will come into play to get a favorable liquid assets.

Is the broker's liquid declaration public or only to SEC.

Can someone explain the facts. Thank you

Deva · 2 Re: SEC Directive Tue Aug 16, 2011 3:17 pm

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Can I add one more to the above?
Will there be discrimination from one Broker firm to another, based on the their liquid position?
Nothing mentioned on the right of the Broker firm to sell when reaching T+5.

stockdad · 3 Application of the amended SEC ruling Tue Aug 16, 2011 3:44 pm

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Deva wrote:Can I add one more to the above?
Will there be discrimination from one Broker firm to another, based on the their liquid position?
Nothing mentioned on the right of the Broker firm to sell when reaching T+5.

There is no discrimination . Rule applies equally to all brokers.
But the amt of credit that can be extended to the clients will vary from broker to broker as it depends on each broker's net liquid asset position.
1/ So, if a broker does not have enough net liquid assets his clients will not benefit by this new ruling.
Those who will benefit will be clients with those brokers having a large net liquid positions.

2/ Further the credit may not apply to all clients uniformly. Broker may have the discretion to extend credit to selected clients, using his judgement as to the creditworthiness of the client.
Also, since there is no mention of margin allowed, again broker may have the discretionn to use his judgement and allocate different margins to even those selected clients.

3/ Obviously, if a client does not get eligible for broker credit as above , those clients have to make their
settlements to the broker within T+5. Any such outstanding beyond T+5, will be subject to forced sale.
In such situation there is no benefit to such clients.

So, to benefit from this new rule,
1) Broker must have sufficient net liquid assets.
2) The client must be eligible for such credit as determined by the specific broker.

stockdad · 4 Re: SEC Directive Tue Aug 16, 2011 3:50 pm

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hawklk wrote:
According to the directive force selling will come into effect end of each month or as soon as the broker looses it's favorable liquid limit. Am I correct?

Can we assume brokers have favorable liquid assets? If not force selling will come into play to get a favorable liquid assets.

Is the broker's liquid declaration public or only to SEC.

Can someone explain the facts. Thank you

Forced sale will come into effect for all outstandings remaining on T+5, there is no change in this condition.
That is, any outstanding not paid for by the client, or not covered by broker credit, any such outstanding will be liable to forced sale on T+5 .

hawklk · 5 Re: SEC Directive Tue Aug 16, 2011 4:06 pm

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Did the brokers give credit based on their favorable liquid situation today? If not there will be a another downtrend of the market. The market shot up like a rocket today.

stockdad · 6 Re: SEC Directive Tue Aug 16, 2011 4:11 pm

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Once the ppl realise the actual effect of the SEC announcement, market sentiment will not be like today.

Deva · 7 Re: SEC Directive Tue Aug 16, 2011 4:21 pm

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stockdad wrote:

Deva wrote:Can I add one more to the above?
Will there be discrimination from one Broker firm to another, based on the their liquid position?
Nothing mentioned on the right of the Broker firm to sell when reaching T+5.

There is no discrimination . Rule applies equally to all brokers.
But the amt of credit that can be extended to the clients will vary from broker to broker as it depends on each broker's net liquid asset position.
1/ So, if a broker does not have enough net liquid assets his clients will not benefit by this new ruling.
Those who will benefit will be clients with those brokers having a large net liquid positions.

Stockdad, please correct me if I am wrong.
Isn't this discrimination?

stockdad · 8 Re: SEC Directive Tue Aug 16, 2011 4:55 pm

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Deva wrote:

stockdad wrote:

Deva wrote:Can I add one more to the above?
Will there be discrimination from one Broker firm to another, based on the their liquid position?
Nothing mentioned on the right of the Broker firm to sell when reaching T+5.

There is no discrimination . Rule applies equally to all brokers.
But the amt of credit that can be extended to the clients will vary from broker to broker as it depends on each broker's net liquid asset position.
1/ So, if a broker does not have enough net liquid assets his clients will not benefit by this new ruling.
Those who will benefit will be clients with those brokers having a large net liquid positions.

Stockdad, please correct me if I am wrong.
Isn't this discrimination?

Deva, it depends on yr view point.
The directive applies to all brokers equally. It is not discriminative between brokers.
But, in the application of the directive, all brokers would not be able to give credit uniformly to clients, as the amount of credit is limited to each boker's net liquid position.

By discrimination if you mean that clients at all broking firms are not able to benefit uniformly,
well, then that is the situation. But this happens due to the brokers financial position.

Obviously,to lend credit to client, broker has to be in a strong financial position first, isn't it so?

And next, even all clients in a broking firm may not get credit from broker. This is also bcos the amt of credit is linked to and so limited by the broker's net liquid position.
In such siuation the broker cannot practically extend credit to all.
There will be some process to identify to whom to extend credit to.

Just think of a bank. Will they be extending credit to all their customers uniformly.
Some may not get any credit. some may get credit on more favorable conditions than the others.

But, I agree it is better had the SEC allowed brokers to leverage their liquid position at least by one time,
then more ppl could have benefiitted.

So, the problem of alleged discrimination lies not in the directive, but in applying it practically.
The world is full of such circumstances. You have to live with it.

econ · 9 Re: SEC Directive Tue Aug 16, 2011 5:18 pm

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what if brokers only give credits to high net worth guys? they can decide the credit clients right?

NightStalker · 10 Re: SEC Directive Tue Aug 16, 2011 6:07 pm

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econ wrote:what if brokers only give credits to high net worth guys? they can decide the credit clients right?

Yes SEC hasn't put any restrictions on how the money needs to be allocated. So it will be at the brokers discretion. Market should run till they realise these things. So better for gamblers these days ;-)