Trading Tips 101

[MaxShockeR]

Trade for Trade status = Good or Bad ?


"shifting any security to trade-for-trade certainly protects the interests of the existing investors and it also keeps speculative forces/players at bay from manipulating large intra day movements of the price."

Dear Friend,

There are more than one questions asked. So, to make it easier for you to understand, I am pasting your question is Italics and write my answer below it.

You had mentioned that the change to trade for trade status is not done to protect the share structure. Wouldn't this form of trade system protect the company from massive shorting or a takeover of sorts?

Yes, it is surely not to protect the share structure. But shifting any security to trade-for-trade certainly protects the interests of the existing investors and it also keeps speculative forces/players at bay from manipulating large intra day movements of the price.

Also, what did you mean when you said "No Intra day Trading Allowed"? Does this mean that one would not be able to "flip" the security, another words, make a purchase and then sell that same block in the same day?

Yes, you have correctly understood. If your purchase any security which is in trade-for-trade, you cannot sell the same security on the same day.

And one last clarification... As I read your explanation, it seems that on a CNS system it seems this is the common rolling system. If I purchase 1000 shares for 25.00 I pay 25000.00 to the brokerage firm. Then when I sell those same shares the same day I receive the 25000.00 + the extra 5.00 per share; minus any fees of course.

This also you have correctly understood. In the above given scenario, you would pay $25,000 + the brokerage on the purchase and receive $30,000 - the brokerage. However, as mentioned / explained in the preceding question, you will not be able to purchase and sell on the same day and get only the difference of the purchase and sell price.

Now, on the trade for trade scenario you mentioned I would have to pay $25,000.00 to take possession of the security, but wouldn't I have to pay anyways to receive my shares?

No, because if the security is not in trade-for-trade, then you will be able to sell the same block on the same day and get only the difference as mentioned above. However, if you decide not the sell the shares / securities on the same day irrespective of it being in trade-for-trade, ONLY THEN you will need to pay $ 25,000

Then you explained that the quantity hat I sell would "Have to be Presented for Delivery" what did you mean exactly? would I have to have a physical certificate of sorts? I did not fully understand that.

I will explain. For example, the shares you bought are in trade-for-trade. So, when you purchase the shares, you will not be able to sell it on the same day. So, it will result into "delivery". This means, you will receive shares , either physically in certificate or in dematerialized form (electronic form) in your account. Now, when you sell it, you will "Present" these shares, i.e. give these shares that you have received towards your sell.

I hope this helps...

Warm Regards,

Read more: Hello, I have a question relating to securites and trading. - JustAnswer http://www.justanswer.com/finance/4olnl-hello-i-question-relating-securites-trading.html (posted by steved_45)