phillip thomas explains all, page-27

This is from a brokerage service that i subscribe to. I thought some of you might appreciate reading it. I have a suspicion that Phil may not have much choice b/c ANZ own his share and their priority will be to recover costs. ouch.

"As some of you will have seen from today’s Market Map page the main issue today is the receivership of margin lender OPES prime. Main points:

* ANZ have appointed an Administrator.
* ANZ have put a statement out saying they shouldn’t suffer any material loss.
* ANZ have frozen all client accounts at OPES (clients can’t sell positions).
* There are concerns that all client positions will have to be sold or transferred and that will manifest itself in market selling. But their securities lending book is only worth about $1bn which could fairly easily be absorbed by the market and may actually involve closing out short positions (positive for the market). Not much market impact expected in other words…but who really knows.

But the real issue is for people who have margin loans through OPES Prime. The fear is that under their margin lending agreements (which are called securities lending agreements) they simply don’t own the stock they thought they did (they never did) - ANZ’s administrator now controls the stock and will presumably sell the stock (which is not beneficially owned by the margin lending client) to satisfy the loan from ANZ ($650m) and Merrill Lynch ($350m) before the host of other creditors including margin clients line up for what is left.

The uncertainty of the situation needs clarification as soon as possible because there are people out there today who think their whole portfolio (life) has just gone up in smoke and that they are going to get “cents in the dollar” rather than stock back. It is unprecedented and will reflect terribly on the market, ASX, ASIC and even ANZ and Merrill Lynch if the man in the street is left to swing to satisfy the big banks. It will not reflect well on margin lending businesses generally and is likely to cause a flight from the practice although the structure of the OPES business is quite different to plain vanilla margin lending. No-one quite knows what shortfall there will be post debt repayments and whether the clients will wear it or some other (Big Brother) will come in to cover it.

The weekend media will be awash with the OPES issue. If you were having a bad day think about what the OPES margin lending clients are going through. The concept that they simply don't own the stocks they were holding and trading is pretty much beyond belief. It was all in the small print....but who reads that.

The other point (which pales into insignificance) is that it has inconveniently reinforced the “Financial Fear” in the market, just when we thought it was safe to come out of hiding – its just impossible to know where the next financial exposure is going to pop up. Almost all the banks are down (CBA up) and without them the market would be up."