What is the reason for T+5

duke · 1 What is the reason for T+5 Tue Jun 28, 2011 9:12 am

duke

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insidetrader quote:
I think the reason you have that credit is not to speculate that in 5 days the stock will go up. It is to allow the buyer to buy more shares without freezing cash with the broker until a transaction happens. If a person cannot understand this then it's a good thing that dumb people lose the money that they shouldn't deserve.
quote end.

In USA, Australia etc. they have the T+3 settlement. I heard USA used to have T+5 but changed it to T+3 some years back.

T+5 is definitely not made to so that trader can buy and sell within 5 days and a make profit although some people can try it. And it's also evident T+5 is not enforced by the brokers these days.

The other alternative is to have the cash in the CDS account before buying anything which means you have to keep the cash with the broker until you get a deal. That's a kind of waste of your funds. So using your existing portfolio as a collateral with this T+5 rule you don't have keep the cash with the broker.

Or are there any other reason for having a T+3 rule?

econ · 2 Re: What is the reason for T+5 Tue Jun 28, 2011 4:08 pm

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T+5 and T+3 are useless if SEC give right brokers to sell shares.
if sec want to end current downward trend of the market what they have to do is stop these T+5 ,T+3 shits.

duke · 3 Re: What is the reason for T+5 Tue Jun 28, 2011 4:23 pm

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econ wrote:T+5 and T+3 are useless if SEC give right brokers to sell shares.
if sec want to end current downward trend of the market what they have to do is stop these T+5 ,T+3 shits.

If a person directs the broker to buy shares through online or phone and if the person does not pay what other option does the broker have? He has to take it from you.
For a very simple example, you request a loaf of bread from the shop. Shopkeeper will hand you one and he expects the person to pay for it. Is it that hard?

econ · 4 Re: What is the reason for T+5 Tue Jun 28, 2011 5:42 pm

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duke wrote:

econ wrote:T+5 and T+3 are useless if SEC give right brokers to sell shares.
if sec want to end current downward trend of the market what they have to do is stop these T+5 ,T+3 shits.

If a person directs the broker to buy shares through online or phone and if the person does not pay what other option does the broker have? He has to take it from you.
For a very simple example, you request a loaf of bread from the shop. Shopkeeper will hand you one and he expects the person to pay for it. Is it that hard?

thats what I am also saying. stop T+5 or T+3 if SEC does not give margin trading via brokers.

allow investers to buy only from their own money. first put your money on the broker account and then buy shares.

Gaja · 5 Re: What is the reason for T+5 Tue Jun 28, 2011 6:59 pm

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econ wrote:

duke wrote:

econ wrote:T+5 and T+3 are useless if SEC give right brokers to sell shares.
if sec want to end current downward trend of the market what they have to do is stop these T+5 ,T+3 shits.

If a person directs the broker to buy shares through online or phone and if the person does not pay what other option does the broker have? He has to take it from you.
For a very simple example, you request a loaf of bread from the shop. Shopkeeper will hand you one and he expects the person to pay for it. Is it that hard?

thats what I am also saying. stop T+5 or T+3 if SEC does not give margin trading via brokers.

allow investers to buy only from their own money. first put your money on the broker account and then buy shares.

I also wel come these kind of systems

xhora · 6 Re: What is the reason for T+5 Tue Jun 28, 2011 7:19 pm

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But how can the system sustain with out credit?

investor1984 · 7 Re: What is the reason for T+5 Tue Jun 28, 2011 7:33 pm

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xhora wrote:But how can the system sustain with out credit?

But too much credit will lead to its own downfall too

wis · 8 Re: What is the reason for T+5 Tue Jun 28, 2011 7:41 pm

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"In 1929, so many people were buying on margin that they had run up a debt of six billion dollars. "
http://forum.srilankaequity.com/t5643-the-wall-street-crash-1929

It was the brokers giving massive credit which created this massively overvalued shares today. For the last few years everybody was buying on credit from each other expecting to sell high tomorrow.

When you take a loan to buy a house or a car, the banks check everything whether you can pay the debt, even do medical tests to check whether you'll live until the debt is settled and even put life insurance. That's how credit should be handled. When you open a margin account with a bank, a responsible bank will do the same, and they won't take any risk. But the brokers are a different kind of creatures. They want to increase the commission and interest. They are greedy and don't care about the consequences. That's why we end up with massively overvalued fundamentally sound stocks. They're not worth the price we pay today, and even a small change can bring down everything because they're not worth it.