K, we are paying for the real cost of the Opes Prime** and other...

K, we are paying for the real cost of the Opes Prime** and other margin debacles.

I've been margin trading fairly intensively for just over 20 years, and in that time have seen some major changes, mostly for the worst. The effect of the Opes mess was to cause a knee-jerk reaction from regulators, who actually seem to assume that all traders are pathologically dishonest and stupid. Many of the rules were drafted by persons who would not know what an LVR was.

I won't repeat what you already know, the incident you describe is infuriating, especially when we read that in the US, it is now legal for some firms to pay money to obtain sensitive reports two seconds ahead of general release. And we know all about hi-frequency trading. And yet we are condemned to the dark ages here.

**What really got me going about Opes was this: I have always regarded margin calls as a form of insurance. Not to be feared. If your back is turned, if you are sick or similar, then your portfolio is protected from disaster by margin call if the market tanks. But Opes I believe did not make margin calls on a supposed smart client, he did not do his own checks, and ended up owing $100m. He's supposed to be smart but I would say he was spectacularly dumb. And so was the broker who let him get away with it. And we pay the price. It was sheer incompetence on the part of both broker and client.

Some of the comments in newspapers about margin trading are so wide of the real-lfe mark as to be ridiculous. Margin trading is a fabulous trading tool, used properly. I know, and you probably do too, that in practice, it is very different to the theory.

One of the big advantages is the ability to quickly gear-up, in a rapidly rising market. That's when the big money is made, but few broker's staff understand that. That will do for now....