Systemic Risk? Pffft! THIS, My Friends, Is Systemic Risk

Stock depository poll

By Chris at

Have you ever asked yourself what happens when you place a trade?

I hadn’t given it much thought until about 10 years ago when something happened which opened my eyes to a single company that holds what is probably the most concentrated risk position in the US market.

Here’s what happened…

So, I took a position in a private placement. The shares came free trading after a 6-month lockup, and the stock had been running like the cops were after it.

It had a half warrant attached, which was deep deep in the money, and I wanted to scoop a healthy chunk of money off the table. Heck, this was a bloody drill play which, as you probably know, are more often than not burning matches. Bright and brilliant until they burn your fingers.

So, I’m busy scrambling to get the stock placed with a broker so that I can trade it.

First up was a very well known broker whose name I’ll keep out of the spotlight (I like the guys and gals there and it’s not that important). I’ll call them broker X.

I have an account with them and they said, “Sure, no problem.” A week later, “Ah sorry Sir, we’re having some questions from compliance.” And then another week passes and “No, so sorry, we can’t take that one.”

I can’t remember the reason now but at this point I’m two weeks down, the stock’s “en fuego,” and I’m getting antsy. I quickly call my broker at Sprott and they took the stock. This took only a couple of days.

Now, with the stock placed I’m free to trade it. And I do. The same day, I pull up my account at broker X and looky here. There is the original stock sitting in my account. Wait! What?! That can’t be. So I pull up my online account at Sprott thinking someone slipped my something in my drink but no…there she is. This is voodoo, or magic, or a cock up. It’s in two places at once.

I’m sure if I hit the sell button at broker X their back office will spasm, and before the bean counters can have a heart attack the system will vomit up the true position. Plus, I’m not an ass and knowing the truth I can’t in good conscience do that. I only own a certain position, not double it as much as I might wish …read more



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