swissaustrian
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Note: As a Swiss resident, I´m not an expert in US securities law, so don´t kill me if I use legally wrong terms. I´m sure the essence of my post is correct, though.
A lot of people are starting to worry about counterparty risks of brokerages in the aftermath of the MF Global bankruptcy. There are obvious counterparty risks in bonds, ETFs, futures, options, and all kinds of derivatives.
Normally stock certificates don´t have a counterparty - except the company you are invested in.
I´m sure a lot of us are holding mining shares, and we probably wouldn´t worry about them in the case of an implosion of financial system. Afterall, the miners should profit from that, right?
If you're holding your stocks in a brokerage account, you shouldn´t assume that you automatically are the legal owner of your stocks, though.
A lot of brokerages hold stocks as trusteeson behalf of their customers. This means that you as the client only have a claim against your broker. You DO NOT own the stock. If the broker goes bankrupt, you´re left with (possibly) nothing.
This is why it is essential to check whether your stocks are registered in your name and not in the name of your broker.
If your broker acts as your trustee, you should immediately register your stocks in your own name. If your broker doesn´t offer that service or rejects to do so, close your account and get a new broker.
Here is how you do an individual registration:
http://www.ehow.com/how_7201721_do-register-stocks_.html
Also make sure that your shares are not part of a so called "dark pool".
A lot of people are starting to worry about counterparty risks of brokerages in the aftermath of the MF Global bankruptcy. There are obvious counterparty risks in bonds, ETFs, futures, options, and all kinds of derivatives.
Normally stock certificates don´t have a counterparty - except the company you are invested in.
I´m sure a lot of us are holding mining shares, and we probably wouldn´t worry about them in the case of an implosion of financial system. Afterall, the miners should profit from that, right?
If you're holding your stocks in a brokerage account, you shouldn´t assume that you automatically are the legal owner of your stocks, though.
A lot of brokerages hold stocks as trusteeson behalf of their customers. This means that you as the client only have a claim against your broker. You DO NOT own the stock. If the broker goes bankrupt, you´re left with (possibly) nothing.
This is why it is essential to check whether your stocks are registered in your name and not in the name of your broker.
If your broker acts as your trustee, you should immediately register your stocks in your own name. If your broker doesn´t offer that service or rejects to do so, close your account and get a new broker.
Here is how you do an individual registration:
http://www.ehow.com/how_7201721_do-register-stocks_.html
Also make sure that your shares are not part of a so called "dark pool".
http://en.wikipedia.org/wiki/Dark_liquidityIn finance, dark pools of liquidity also referred to as dark liquidity or simply dark pools is trading volume or liquidity that is not openly available to the public. The bulk of these represent large trades by financial institutions that are offered away from public exchanges so that trades are anonymous. The fragmentation of financial trading venues and electronic trading has allowed dark pools to be created, and they are normally accessed through crossing networks or directly between market participants.
...
broker-owned dark pools where clients of the broker interact, most commonly with other clients of the broker (possibly including its own proprietary traders) in conditions of anonymity