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Margin Loans Share trading using a margin loan

Discussion in 'Finance & Banking' started by johnnyb, 10th May, 2007.

  1. johnnyb

    johnnyb Well-Known Member

    Joined:
    16th Aug, 2005
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    Location:
    Hobart
    Hi All,

    I currently have a margin loan with Leveraged Equities that is used for our managed funds. I am looking into doing some direct share tading as well. My understanding is that I set up an account with a broker (eg, Comsec), and I tell them that LE is the thrid party settler on that account. This is all OK.

    The thing I don't understand relates to timing of the purchases. If I put an order in to buy some shares wouldn't Comsec need to first check my account balance at LE to see if the funds are available? Wouldn't this take some time, which means that by the time the purchase occurs the price may have moved significantly? Maybe this doesn't matter too much if you're buying the shares for long term holding, but if you were actively trading I can't see how this could work.

    Can please someone explain how this works? Thanks.

    Yours,
    John.
     
  2. DaveJ

    DaveJ Well-Known Member

    Joined:
    13th Nov, 2005
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    I think it works more along the lines that your 'stock broker' would just buy the shares that you wanted then ask for the settlement funds from your leveraged margin account. If there are insufficient funds you would be charged all the non-settlement fees and penalty rates each day etc etc.

    I believe it would be your responsibility to ensure sufficient funds in your margin account, they won't check. So the trades you want to do would take no longer to trade. However a full service broker could check the account for sufficient funds but thats why you pay them the 'full' brokerage:rolleyes:


    regards,

    DaveJ
     
  3. johnnyb

    johnnyb Well-Known Member

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    16th Aug, 2005
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    Hobart
    Thanks for that Dave. I thought the payment to the broker would be in real time, but if that's not the case then it all makes sense.

    John.
     
  4. DaveA

    DaveA Well-Known Member

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    19th Feb, 2007
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    Location:
    Sydney, NSW
    I think usually its settlement after the second business day of the purchase.. Same for Forex trading as well i think...
     
  5. Tropo

    Tropo Well-Known Member

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    17th Aug, 2005
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    "Same for Forex trading as well i think..."

    On average 24 h.
    :cool: