Penson (PNSN) stock down on heavy volume

[Scataphagos]

Quote from rmorse:

That's an excellent question. I will find out if SIPC or any other entity protects the assets in a futures account.

Bob

Traditionally the way "futures accounts" have worked....

1. Losing clients which incur debits have their account settled by the clearing firm, nightly.

2. The firm has full recourse to collect on debits.

3. If there are "uncollectable debits", the firm's capital account is used to settle those debits until the capital account is exhausted.

4. If the firm's capital account is exhausted and there are still uncollectible debits, CUSTOMER accounts must share the loss to satisfy the debit, according to some formula.

Obviously, (1) it's highly unlikely to ever get down to the "customer account sharing losses" level, and (2) it's good that your clearing member firm have a substantial "capital account" to buffer losses.

The kinds of losses Penson may be potentially facing could have a large impact on their "capital account"..

Even with that being said, commodity firms try to be diligent to avoid customers getting into a debit situation... by monitoring positions, customer equity, and forcing the close-out of losing postions to protect not only the firm but other customers.

 

[rmorse]

Quote from Scataphagos:

Traditionally the way "futures accounts" have worked....

1. Losing clients which incur debits have their account settled by the clearing firm, nightly.

2. The firm has full recourse to collect on debits.

3. If there are "uncollectable debits", the firm's capital account is used to settle those debits until the capital account is exhausted.

4. If the firm's capital account is exhausted and there are still uncollectible debits, CUSTOMER accounts must share the loss to satisfy the debit, according to some formula.

Obviously, (1) it's highly unlikely to ever get down to the "customer account sharing losses" level, and (2) it's good that your clearing member firm have a substantial "capital account" to buffer losses.

The kinds of losses Penson may be potentially facing could have a large impact on their "capital account"..

Even with that being said, commodity firms try to be diligent to avoid customers getting into a debit situation... by monitoring positions, customer equity, and forcing the close-out of losing postions to protect not only the firm but other customers.

That sounds correct. I can't speak for Penson, I only read what everyone else is reading. Their capital account looks secure currently. The value of the stock to an investor and the cash available for regulatory purposes not are connected.

I think if a lot of customers examined closely the assets of discount brokers, not the big ones that are well known, but many of the online little known brokers that offer bulk rates, you might view Penson in a better light.

Bob

 

[Scataphagos]

Quote from rmorse:

That sounds correct. I can't speak for Penson, I only read what everyone else is reading. Their capital account looks secure currently. The value of the stock to an investor and the cash available for regulatory purposes not are connected.

I think if a lot of customers examined closely the assets of discount brokers, not the big ones that are well known, but many of the online little known brokers that offer bulk rates, you might view Penson in a better light.

Bob

It's always a risk to do business with a firm operating "on a shoe string" with thin capital... regardless of the low commission rates they may offer.

 

[rmorse]

Quote from Scataphagos:

It's always a risk to do business with a firm operating "on a shoe string" with thing capital... regardless of the low commission rates they may offer.

Agreed. It is a business decision every trader makes. Sometimes we don't have a choice if we want to play. If you want an account at GSEC, the min. is $5MM, and they don't even want those accounts. Plus, their execution fees through RediPlus are a premium to other platforms.

Penson is very flexible with regard to how the trader runs their trading. It give the Introducing Broker the ability to offer just about anything that's available, even sponsored routes to the exchanges. (The fastest route to the ECNs for low latency strategies.)

 

[rmorse]

I just checked, Futures are not covered by SIPC or any other protection because it is not necessary. Unlike margin accounts with equities, all futures accounts in the US are segregated accounts, in the customers names. The futures brokers assets and other customer assets are all held separate.

 

[Scataphagos]

Quote from rmorse:

I just checked, Futures are not covered by SIPC or any other protection because it is not necessary. Unlike margin accounts with equities, all futures accounts in the US are segregated accounts, in the customers names. The futures brokers assets and other customer assets are all held separate.

Wouldn't go so far as to claim "[SIPC protection] not necessary". The way "things" are done provides a buffer against non-market losses, but still not the equivalent of "insurance".

 

[mews]

Quote from kpat2122:

Good thing I got my funds out of my retail brokerage last week that cleared Penson and moved to a prop with Wedbush. Something seemed fishy last week knew it was time to make a move.

How did you know something was fishy? and you think that moving your funds out of a SIPC insured retail account and moving it into a prop account through another firm at Wedbush offers you more protection?

Additonally, Wedbush and Penson have pretty much have an equal capital base for the most part.

Penson can also always issue more stock to bring in more capital which will hurt the stock price but give them additonal capital if necessary. As was mentioned, stock price and their regulatory capital base are not necessarily tied to one another.

 

[fanews]

another company would just buy the assets(customers) as for pension shareholders well that is another story. pension has a lot of brokers who clear through them. and the trading volume is like 10% of 2007 levels. retail trading peaked in 2006/2007/2008.

Quote from mews:

How did you know something was fishy? and you think that moving your funds out of a SIPC insured retail account and moving it into a prop account through another firm at Wedbush offers you more protection?

Additonally, Wedbush and Penson have pretty much have an equal capital base for the most part.

Penson can also always issue more stock to bring in more capital which will hurt the stock price but give them additonal capital if necessary. As was mentioned, stock price and their regulatory capital base are not necessarily tied to one another.

 

[mktman]

ugh.
MB trading clears through them.

 

[m22au]

Quote from Scataphagos:

Really, I thought they did. Futures accounts are settled every night... balances are reflected in customer accounts... What then does Penson do?

Penson clears futures for TD Ameritrade