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1996-06-06 - Re: whitehouse web incident, viva la web revolution

Header Data

From: “Perry E. Metzger” <perry@piermont.com>
To: perry@piermont.com
Message Hash: 960e30f840d7cd006fffb26a8f5a81c902991aaa62fa4523b579f4a1a8e5f661
Message ID: <199606052110.RAA12739@jekyll.piermont.com>
Reply To: <199606052043.QAA12656@jekyll.piermont.com>
UTC Datetime: 1996-06-06 08:41:53 UTC
Raw Date: Thu, 6 Jun 1996 16:41:53 +0800

Raw message

From: "Perry E. Metzger" <perry@piermont.com>
Date: Thu, 6 Jun 1996 16:41:53 +0800
To: perry@piermont.com
Subject: Re: whitehouse web incident, viva la web revolution
In-Reply-To: <199606052043.QAA12656@jekyll.piermont.com>
Message-ID: <199606052110.RAA12739@jekyll.piermont.com>
MIME-Version: 1.0
Content-Type: text/plain



I realized that there was an ambiguity in my last missive. I'd like to
close that ambiguity.

"Perry E. Metzger" writes:
> > Forgive me if I am wrong but are CFTC margin requirements not 
> > requirements placed on brokers as opposed to requirements brokers
> > must impose on customers?
> 
> I must confess that I don't know, largely because its irrelevant, even
> in this case.

If you meant "brokers have to put up the margin, not customers, and
they don't have to charge customers the margin" you were simply flat
out wrong. Margin is a customer responsibility, not a broker
responsibility. I will point out, though, that brokers face liability
if their customers cannot meet their obligations -- which naturally
would make any honest broker suspicious of a customer trading a highly
leveraged position in which a tiny move in the market would wipe out
the customer's entire net worth, thus likely exposing the broker to
substantial risk.

Stop loss orders, incidently, aren't any use if the damage would be
done before any such order could be executed.

Perry

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