thank you...
Posted on 01/29/2008 5:37:30 PM PST by jiggyboy
Securities dealer Tricom Equities has failed to settle tens of millions of dollars worth of share trades after being caught in a deluge of margin calls, according to Fairfax media reports.
Tricom is thought to be under pressure to pay down loans to ANZ Banking Group, which financed the significant expansion of the company's $2.7 billion margin loan book, the reports said.
Tricom has attributed its settlement delays to exceptionally large trades last week.
According to the media reports, the margin loan specialist took heavy losses in trade on Tuesday last week, when the worst sharemarket fall in 18 years brought a record number of margin calls.
According to Tricom's managing director Lance Rosenberg administrative issues springing from an exceptionally large volume last week had caused its problems and he was confident the problem would be resolved by today.
"Some administrative issues have arisen, we are confident that they will be resolved by the morning and Tricom is entitled to net payment and the overnight position is net excess."
According to documents lodged with ASIC, Tricom's creditors include ANZ, Commonwealth Bank and Westpac along with investment banks Morgan Stanley, Merrill Lynch and Babcock & Brown, and fund managers BT Securities, Aspen Capital Partners and, as of June, Allco Principals Investments. Many of the charges relate to margin lending facilities.
Tricom was one of two margin lenders that forced Allco Principals Investments and Allco Principals Trust to sell 22.1 million shares in Allco Finance Group (AFG) on Wednesday last week, causing AFG shares to fall more than 26 per cent in that day's trade, The Age said.
This is the first time in decades a brokerage had failed to settle any transaction, The Australian Financial Review said.
"Why you can't expect..."
"You know the rules: All accounts to be settled at the end of the day's trading, without exception."
"You know perfectly well we don't have one hundred million dollars in cash!"
"I'm sorry, boys. Put the Duke brothers' seats on the exchange up for sale at once. Seize all assets of Duke & Duke Commodity Brokers, as well as all personal holdings of Randolph and Mortimer Duke."
"We're ruined!"
"This is an outrage! I demand an investigation!"
"You can't sell our seats! A Duke has been on this exchange since it was founded!
"We founded this exchange! It's ours! It belongs to us!" (collapses)
"We'd better call your brother an ambulance."
"**** him! I want trading reopened, right now! Get those brokers back in here! Turn those machines back on! Turn those machines back on!"
thank you...
Hilarious! Loved that movie when I was younger.
the Tricom margin call ain’t done yet, and their clients are almost trapped:
“If insufficient clients pay Tricom the cash it is demanding, and needs, and ANZ takes possession of its assets to protect its own position – thus sending the firm into receivership – then the margin clients become nothing more than unsecured creditors of the company for the amount they have already paid.”
“To be clear about this: if Tricom goes broke, tens of thousands of retail investors would almost certainly lose everything. ANZ would own their shares (or rather the shares they think they own) and sell them to recover its debt.”
“And if more retail clients of Tricom become aware that paying their own margin calls won’t protect them, then they may not do it in sufficient numbers, and Tricom may have difficulty getting the cash needed to meet that margin call.”
http://www.businessspectator.com.au/bs.nsf/Article/Five-minutes-to-midnight-BDB5Y?OpenDocument
Sounds terrible on the surface, but the usual reality is that retail clients of brokers allow the on-line broker to keep all of their shares.
Margin calls for those retail clients are then a mere formality, as Tricom holds and can sell those shares (seizure isn't required because Tricom already holds them).
And because Tricom holds all of those shares and can sell them instantly, Tricom can get large loans from banks (well, before stories like this come out, at least).
That "usual reality" is the ticking bomb: there is a very real danger that Tricon will indeed keep all of their shares, then sell them to pay its own margin call to ANZ!
The client wakes up one fine day next week and has nothing in his account but a message that boils down to "here's how we were able to claim every last cent out of your account as ours".
For clients who borrowed money to trade shares, yes.
Bump.
Latest Tricom margin call news ping to the Evil Gloomers And Doomers list
“The ASX [Australian Stock Exchange] has since taken the unprecedented step of putting an official into Tricom’s offices and imposing a series of restrictions on the broker, including daily reporting of its ability to meet its obligations and the appointment of an independent auditor to examine ‘Tricom’s operational and financial control environment’.”
(Looks like they’re working their way out of it but I still think one more shock like two weeks ago could turn these guys into Domino Zero in short order.)
“Many of Tricom’s 300 dealers have been busy reducing the securities loan book over the past week by asking clients to sell stock or refinance and move their accounts to competitors. This has added to the volatility in the stockmarket as investors traded out of stock.”
http://www.theaustralian.news.com.au/story/0,25197,23154691-601,00.html
The skimming of bonus monies and 'profits' from laundered cooked books full of junk paper.
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