50ft cat This process will be educative for me. I am not a client of Opes, thank goodness, but I am of a CFD provider, e*trade which had to be bailed out a while back. Phew. Now is custodian C lends shares to brokerage Opes for a fee, and brokerage Opes then on-lends them to hedge fund H who use them to sell short, when the receivers of Opes call the loaned stock back they will have to buy on market and provide said stock to the receivers. But as these shares are loaned they do not belong to Opes for the receivers to sell. They should be returned to the custodian who lent them. In our legal system if I lend or rent something to someone, or vice versa it does not make it mine to sell. eg If i rented a cement mixer from a hire company and sold it the next day as if I owned it, it would be a criminal offence, not just a civil situation. Theft, fraudulent misrepresentation, etc. What dont I understand here? And Ill bet that if say etrade were to fold-cant see how as a bank subsidiary, I would lose not only my security margin but all money in the account profits and collateral, and would rank as an unsecured creditor. So it looks like the smart move is to keep the minimum in the actual brokers trading account book and hold most of the reserves and profits in the attached bank account. Just move back and forth as required. More effort, but the collateral above the minimum would be safe from a brokers collapse. But say the receivers/banks sold "your" stock to cover the margin loan, and they tossed it out off market (perhaps to a subsidiary?) for half price. Or dumped a huge amount of stock like the rank amateurs they are, in a few minutes or hours for whatever they could get. Are you then up for that "loss" as well? Will they come back after you for that, later, to add insult to injury?
Dont want to go on but I know someone who was a big concrete contractor. Im very cynical and yes, almost paranoid, for good reason. He owned as his main asset, $600,000 worth of scaffolding (Originally $1 million another $400,000 of it was stolen by a competitor from the rented yard a few weeks after he was admitted to hospital) He owed $17,000 on it to a bank. He got lymph cancer and was hospitalised and missed a couple of little payments. The bank promptly foreclosed without consulting him and sold the whole lot for....$17,000! Yes. $17k. They wouldnt say who to. He came out of hospital penniless month or two later, with cancer, and only had his pensioner mother to live with. The bank? Tell someone who cares. They got the money owing to them. Thats it. I suspect foul play by bank staff. If the media reports are correct about off market transactions at half price in stock held by Opes by the banks/custodians, I would be getting the police Fraud Squad in quick smart to check it out. Who to? Who benefited from the inside/mates deal transaction? Not just the slow old PS plodders down at ASIC. This needs a financial SWAT team.
