Blue Diamond Ventures Inc (BLDV)

[stervc]

Why no online buying at some Brokerages...

I had researched this years ago and I don't have my notes in front of me on this so bare with me on what I can remember. This is a post I made on some other forums and I see it fit to make this post here too from when I saw some earlier posts stating that Scottrade stopped online buying of BLDV shares as you have to call in.

Someone I spoke to at Ameritrade & Schwab in the past kind of let the cat out of the bag unexpectedly as to why brokerage companies sometime stop online trading to force you to have to call in to place a buy order. Schwab usually allows you to now these stocks online more than any other broker I know of. This is why I think everyone should always have more than one account to include an account with Charles Schwab. Here’s what I remember being told.

There exists what is known as the "Custodian of Accounts" on the side of the brokerage companies and on the side of the Market Makers (MMs). They are responsible for verifying and coordinating the electronic inventory of shares as transactions are monitored for buying and selling.

Whenever there is a shortage of shares or an extremely low inventory of shares available for the public to buy, the level of coordination for the dissemination of those shares have to be monitored that much more closely to make sure there is not an issue during the settlement time frame of T+3 days. This generally means that the “legitimate” inventory of BLDV shares is at zero. With the inventory being zero (or a deficit of shares in the negative), this means that a log of shares sold to an investor must be kept that contributed towards the MMs trying to create or maintain an orderly market and must be tracked for a known amount to be covered in the future. That’s why we see the huge spreads too on low volume.

Since there is a known shortage within the inventory of shares for BLDV, imagine what would happen if I put in an order to buy 5 million shares through TD Ameritrade and at the same time you put in an order to buy 5 million shares of BLDV through Scottrade. Now imagine that only 5 million shares are remaining in the complete or total "inventory of shares" within the MMs “Custodian of Accounts” to disseminate from their “legit” inventory of BLDV shares or from the “illegit” inventory of BLDV shares that would be used to create an orderly market.

Since the MMs inventory of BLDV shares is so small, having transactions happening all at once could cause an imbalance or negative balance of shares to never be "officially" covered. Forcing investors to call in creates a more in depth and finite way of streamlining the control of ordering shares from the inventory to one at a time to make sure the inventory issue does not get out of hand from all of the brokers and brokerage companies throughout.

Imagine in the example above what would happen if they authorized electronic purchasing as usual and allowed the 5 million share buy to go through at both Ameritrade and Scottrade. That would be a total of 10 million shares bought of BLDV, but keep in mind that the MMs only had an inventory of BLDV shares from their “Custodian of Accounts” of 5 million shares. When T+3 days come around, who do the MMs give the 5 million shares of BLDV to for covering; Ameritrade or Scottrade? This could create an issue at the Clearing Houses as all trades have to be settled. There would be a 5 million share imbalance of BLDV shares unsettled. This would be the numbers that the MMs report to FINRA to interface their data feed with pinksheets.com reflected under the “Short Interest” section as I mentioned in the post below:
http://investorshub.advfn.com/boards/read_msg.asp?message_id=28872396

The wheat example below within Investopedia might help to better understand too:
http://www.investopedia.com/terms/c/clearinghouse.asp

This shows me that if significant "buying" volume comes into BLDV, there might be a major problem for the brokerage companies and the MMs for having a shortage of shares to create an orderly market for BLDV. To fix the problem, the MMs would have to seriously increase the bid to entice enough selling until they capture enough shares out of the open market to maintain order. This could cause some serious price increases if BLDV drops some serious news to generate much more buying. We should be heading up in a huge way if I had to guess as more and more people realize all of BLDV’s potential.

v/r
Sterling