The Securities and Exchange Commission today announced that Morgan Stanley & Co. LLC has agreed to pay $7.5 million to settle charges it used trades involving customer cash to lower the firm's borrowing costs in violation of the SEC's Customer Protection Rule.
[...] According to the SEC's order, Morgan Stanley had its affiliate, Morgan Stanley Equity Financing Ltd., serve as a customer of its U.S. broker-dealer, a relationship that allowed the affiliate to use margin loans from the U.S. broker-dealer to finance the costs of hedging swap trades with customers. The margin loans lowered the borrowing costs incurred to hedge these swap trades and reduced the U.S. broker-dealer's customer reserve account deposit requirements by tens to hundreds of millions of dollars per day.
The SEC order finds that Morgan Stanley's affiliated transactions violated the Customer Protection Rule and that as a result of inaccurately calculating its customer reserve account requirements, it submitted inaccurate reports to the SEC. Morgan Stanley provided substantial cooperation during the SEC's investigation and has agreed to review its compliance with the Customer Protection Rule and to take remedial steps to improve its calculation processes. Morgan Stanley also significantly increased the amount of excess funds it maintains in its customer reserve account.
Source: The Securities and Exchange Commission
(Score: 0) by Anonymous Coward on Thursday December 22 2016, @01:32AM
Thanks, but I think:
You have 10,000 dollars. But you need 10,000 to buy the car.
should be:
You have 10,000 dollars. But you need 20,000 to buy the car.
(Score: 0) by Anonymous Coward on Thursday December 22 2016, @03:39AM
You can do it either way. Just beware the 'margin call'.
(Score: 1) by Francis on Thursday December 22 2016, @06:15AM
Yes, but with interest rates being what they are, you're better off just using the cash to buy the car and then you don't have to worry about anything other than wrecking the car.
Coincidentally, that's one of the reasons why so few Americans have enough savings. Why bother to save when the interest rates in savings accounts are typically below 1% and the Federal Reserve purposefully keeps inflation at 2-3% under the misguided belief that perpetual inflation is good for the economy. It's not good for the economy any more than perpetual deflation is. The only difference is that it takes a lot longer for the ill-effects of inflation to appear than deflation.
Having inflationary or deflationary expectations for decades into the future is a serious problem. If you're expecting inflation into the future, then it makes sense to own things rather than save money. If you're expecting deflation, then the opposite strategy is the safer bet as your money gains value over time. Both lead to serious economic problems over the long term.
The correct monetary strategy is to permit the economy to have period of inflation and deflation, but to manage it so that they are kept within a few percent of zero and are kept shorter rather than longer. That way you don't have perverse incentives to either hoard cash or go deep into debt knowing that the debt will inexpensive to repay in the future.