Re: Paper Losses!
in response to
by
posted on
May 04, 2014 10:00AM
Rick, I could be wrong (all- feel free to correct me)....but I always thought the brokerages trading floor uses some of their client positions for trading.
Ie. I trade with Broker A and have significant amount of shares (for retail). I am likely not the only one we uses Broker A, therefore Broker A has X amount of POET shares in their electronic vaults.
Whose to stop the Broker A's trading floor making bet's, in and out of POET, protected by their clients shares (if shorting) - in the short term. If the client wanted to sell their shares, the trading floor has 3 days to "make it right" for the trade to officially clear and cash to be produced.
Even if if the clients shares are held in a separate account, there are ways the bank can leverage the positions, as they have correlating SW systems to manage the process.
Similar to our bank accounts...the bank pays us 1%ish on our traditional bank savings accounts, but you know they are taking those funds and making more on the back end, hence their profit margin. They have a pool of money where they do this accrossmany thousands of clients, therefore withdrawals and redemptions are managed based on historical probability and percentages set aside for in/out flow.
We may be surprised at some of things financial institiutions do on the back end.
It is frustrating, but not sure how much we can do about it. Hang in there.