Brokers have billions of credit available but telling you they cannot give credit

Why are brokers saying they don't have credit but the truth is they are not giving credit when they can give billions? Why are they fooling us? Why did they fool the President?

They said the planned meeting follows a discussion the CSBA had with President Mahinda Rajapaksa earlier this week where they submitted proposals to prop up a crisis-hit market. They said that the SEC is focussing on two proposals which are under its purview – replacing price bands with circuit breakers and extending broker credit twice to the value of their net liquidity capital. While they say that circuit breakers are a possibility, they point out that brokers already have Rs 2.24 billion worth of unutilised credit. “As at now they can lend credit up to the value of their liquid assets. So what they haven’t used from their liquid asset values adds to this amount,” a SEC official told the Business Times.

http://sundaytimes.lk/111204/BusinessTimes/bt02.html

But this much of credit will help to mkt crash. So, part of it should be allowed

bakapandithaya wrote:But this much of credit will help to mkt crash. So, part of it should be allowed

You mean brokers are asking to reduce the credit limit?

insidertrader wrote:

bakapandithaya wrote:But this much of credit will help to mkt crash. So, part of it should be allowed

You mean brokers are asking to reduce the credit limit?

No, no. They are asking to increase it. My personal view is using this much credit may spoil the mkt

Question SEC should look into is why this available credit has not been used. The answer is foced selling. Even if this 2 billion credit is used, this has to be settled in t+5, therefore it's not surprising that there are such unused credit. Settling of the credit is automated. Within 5 days there will be 0 credit utilized if all credit were used in 1 day.

I believe where we went wrong is credit settling. Either it has to be t+0 (have to have money in the ac to buy) or t+n. Where n should be a much long period. Say about 10 or 20. This long time period would give more time for the creditor to sell voluntarily. As I can see we have only these 2 options to mitigate the force selling making the market drive down.

those sec idiots who imposed rules and regulations now blame brokers to market slow down.
it is SEC idiots who ruined the market not the brokers.

chamith wrote:Question SEC should look into is why this available credit has not been used. The answer is foced selling. Even if this 2 billion credit is used, this has to be settled in t+5, therefore it's not surprising that there are such unused credit. Settling of the credit is automated. Within 5 days there will be 0 credit utilized if all credit were used in 1 day.

I believe where we went wrong is credit settling. Either it has to be t+0 (have to have money in the ac to buy) or t+n. Where n should be a much long period. Say about 10 or 20. This long time period would give more time for the creditor to sell voluntarily. As I can see we have only these 2 options to mitigate the force selling making the market drive down.

Wrong. If the brokers are force selling after T+5 days saying they have to because SEC told them to then your trusted friendly broker is lying.

Brokers are allowed give credit over T+3 days

Therefore, the SEC hereby directs the Colombo Stock Exchange (CSE) as follows:

1. To permit Licensed Stock Brokers to extend credit to investors over T+3 days based on the computation of Liquid Assets less Obligations, maintaining a leverage at zero level as set out in Annexure 1 hereto;

http://www.lankabusinessonline.com/fullstory.php?nid=146837552

What is 2.24 billion freinds.This is an amount available for all the Brokers. Is that enough to facilitate their clients? That is an amount less than one day market turnover. It is like day to cash balance of a business.

Rajaraam wrote:What is 2.24 billion freinds.This is an amount available for all the Brokers. Is that enough to facilitate their clients? That is an amount less than one day market turnover. It is like day to cash balance of a business.

I am rolling on the floor laughing at this. The last time the credit rules were changed, I pointed out that only 4 billion was being added and that's hardly 2 days turnover and everyone jumped on me.

But that story got another batch of suckers to buy in while the big boys sold out. Now exactly as we predicted another batch of suckers bought in with the latest story. The CSE operates on a principal that's much older than any equity market: "There is a sucker born every minute"

Wasn't it reported before that brokers have lent around 10 times their asset value or lending capacity and that figure was 8 billion.

Now they have over 2 billion un-utilised credit and allowing to double their credit capacity will bring them close to that value of 8 billion. (Assuming some credit is already given out to pet investors)

The numbers look dodgy and maybe someone can shed more light or maybe i am confused!

SEC cancels meeting tomorrow with stock brokers - http://sundaytimes.lk/111204/BusinessTimes/bt02.html

Cheers!

insidertrader wrote:

chamith wrote:Question SEC should look into is why this available credit has not been used. The answer is foced selling. Even if this 2 billion credit is used, this has to be settled in t+5, therefore it's not surprising that there are such unused credit. Settling of the credit is automated. Within 5 days there will be 0 credit utilized if all credit were used in 1 day.

I believe where we went wrong is credit settling. Either it has to be t+0 (have to have money in the ac to buy) or t+n. Where n should be a much long period. Say about 10 or 20. This long time period would give more time for the creditor to sell voluntarily. As I can see we have only these 2 options to mitigate the force selling making the market drive down.

Wrong. If the brokers are force selling after T+5 days saying they have to because SEC told them to then your trusted friendly broker is lying.

Brokers are allowed give credit over T+3 days

Therefore, the SEC hereby directs the Colombo Stock Exchange (CSE) as follows:

1. To permit Licensed Stock Brokers to extend credit to investors over T+3 days based on the computation of Liquid Assets less Obligations, maintaining a leverage at zero level as set out in Annexure 1 hereto;

http://www.lankabusinessonline.com/fullstory.php?nid=146837552

So after t+5 they have to force sell irrespective of their assets.
If you dont presume that its not the case then NO point of arguing.

Presuming forceselling is what drives market down, the 2 options are to
1. No credit at all
2. Give a longer period to settle without forceselling,

could mitigate the impact for some extend.

Rapaport wrote:Wasn't it reported before that brokers have lent around 10 times their asset value or lending capacity and that figure was 8 billion.

Now they have over 2 billion un-utilised credit and allowing to double their credit capacity will bring them close to that value of 8 billion. (Assuming some credit is already given out to pet investors)

The numbers look dodgy and maybe someone can shed more light or maybe i am confused!

SEC cancels meeting tomorrow with stock brokers - http://sundaytimes.lk/111204/BusinessTimes/bt02.html

Cheers!

Some say this excess credit make the bubble and if it is 8 billion which is the turnover of 2-3 days of the market How can it make a bubble ? If that amount can make such a bubble then 2 billion has to be a considerable amount and we can not laugh at it.Can we ?

thanks for info

insidertrader wrote:Why are brokers saying they don't have credit but the truth is they are not giving credit when they can give billions? Why are they fooling us? Why did they fool the President?

Brokers can give credit only upto their eligible amount. How much to give, within that limit, is each individual broker's business decision.

Brokers who are eligible to give more credit do not want to give.
Brokers who have exhausted their limits want the limits increased.

only one billion credit?so why hell sec so much worried about ?i billion is nothing.can you believe one billion is enough to make a bubble.one idiot says credit is one billion and it would cause Bangladesh type crash.

lokuayya wrote:only one billion credit?so why hell sec so much worried about ?i billion is nothing.can you believe one billion is enough to make a bubble.one idiot says credit is one billion and it would cause Bangladesh type crash.

Yea, lokuayya. Without analysing actual situation some are posting against positive recommendations brought by the Brokers Assciation to the government.Since this forum is opened for all who are interested including SEC officials such posts could be used to justify SEC's wrong actions and strenthen SEC's hand enabling them to re-negotiate with the government to continue the actions already taken. At the end they all will get their sallary and we will be losing.That is the story.

Rajaraam wrote:

lokuayya wrote:only one billion credit?so why hell sec so much worried about ?i billion is nothing.can you believe one billion is enough to make a bubble.one idiot says credit is one billion and it would cause Bangladesh type crash.

Yea, lokuayya. Without analysing actual situation some are posting against positive recommendations brought by the Brokers Assciation to the government.Since this forum is opened for all who are interested including SEC officials such posts could be used to justify SEC's wrong actions and strenthen SEC's hand enabling them to re-negotiate with the government to continue the actions already taken. At the end they all will get their sallary and we will be losing.That is the story.

And to think that the SEC was actually trying to protect some of the people here.
To be quite honest I used to think that creating a bubble with 4 billion would be hard work. But in recent times I have realized the error of my ways. YOu could probably create a bubble with even 500 million. I will be blogging about this soon, but till then read this LBR article it will be an eye opener: http://www.lbr.lk/fullstory.php?nid=201011181206341945

Most of times Sunday Times gives negative news.

janidu wrote:Most of times Sunday Times gives negative news.

Yes, We should try Daily News.

Truth is bitter.

lokuayya wrote:only one billion credit?so why hell sec so much worried about ?i billion is nothing.can you believe one billion is enough to make a bubble.one idiot says credit is one billion and it would cause Bangladesh type crash.

in this shit illiquid market one billion can control the market behaviour,if you think its impossible,
let me control the ASI at least two days

its just easy,even i can push up prices and give you some carrots to eat
you wont believe me

The way this discussion is going, the scene created by the media and/or SEC and/or Brokers and/or rumours, looks like 8-10 billion rupees ($80million) is sufficient to create or deflate a bubble or crash the stocks, in a market worth 2 Trillion rupees ($20 Billion).

There are many people who have invested more than this which is not credit and much money is waiting on the sidelines to enter. For example like DFFC sold COMB shares for 6 billion sometime back with a hefty capital gain reinvested a part of it (small part) to buy 10% of NTB and they have a few billions more to put in if needed at the right time even after giving a good Dividen after the capital gain.

I feel more money is involved in this whole credit biryani! The brokers cant show the mess they are in and SEC cannot expose and cause panic. However i feel SEC did a good job and slowly deflated the bubble which was forming. What next?

Cheers!

I guess you don't need billions or millions. You can push up the share market merely by buying BUKI 100, CARS 100, WAPO 100 everyday. Foolish locals will follow. Didn't that happen few months back? This can happen again. There was a press release today I think of CARS published after 1 month of release of the results. I wonder why? Was it because the letter got delayed because of the postal strike?

duke wrote:I guess you don't need billions or millions. You can push up the share market merely by buying BUKI 100, CARS 100, WAPO 100 everyday. Foolish locals will follow. Didn't that happen few months back? This can happen again. There was a press release today I think of CARS published after 1 month of release of the results. I wonder why? Was it because the letter got delayed because of the postal strike?

hehe,ya it;s a easy task......there is bunch of suckers to buy what professionals pushes

insidertrader wrote:

chamith wrote:Question SEC should look into is why this available credit has not been used. The answer is foced selling. Even if this 2 billion credit is used, this has to be settled in t+5, therefore it's not surprising that there are such unused credit. Settling of the credit is automated. Within 5 days there will be 0 credit utilized if all credit were used in 1 day.

I believe where we went wrong is credit settling. Either it has to be t+0 (have to have money in the ac to buy) or t+n. Where n should be a much long period. Say about 10 or 20. This long time period would give more time for the creditor to sell voluntarily. As I can see we have only these 2 options to mitigate the force selling making the market drive down.

Wrong. If the brokers are force selling after T+5 days saying they have to because SEC told them to then your trusted friendly broker is lying.

Brokers are allowed give credit over T+3 days

Therefore, the SEC hereby directs the Colombo Stock Exchange (CSE) as follows:

1. To permit Licensed Stock Brokers to extend credit to investors over T+3 days based on the computation of Liquid Assets less Obligations, maintaining a leverage at zero level as set out in Annexure 1 hereto;

http://www.lankabusinessonline.com/fullstory.php?nid=146837552

Problem with many brokers is that they can't give credit to all the customers and for most less than half of there customers! So how are they going to choose who they can and can't ? Because of this what they do is not give credit at all and let the clients sell at there will even if he is late on t+5! At least thats what Asha Phillips does! They will not mind you if you go over t+5 if its a small amount !

Some ppl's views here encourage us for pannic selling and small investors who read their posts think that they would have not taken a decision to invest in stock market. Those ppl are trying to exit as early as posible( even some of my very good freinds) If these guys continue posting like this ASI would come down to around 3500-4000 level within a month coz said posts discourage new ppl to enter. Anyone who reads this forum posts these days will not enter this market and ppl who are already in business would try to exit soon. ( including myself.)