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In the booking function, the customer’s transaction is
entered on petitioner’s records, including the recording of fees
and commissions due to petitioner.
Unlike many other discount brokers, who depend on third-
party vendors, petitioner performs all execution, clearing, and
account maintenance functions for its customers. This enables
petitioner to gain greater control over the quality of customer
service and to retain free credit balances and securities for use
in margin lending.
On the settlement date, petitioner physically effects the
delivery of the securities and receipt of the sale price, in the
case of a sale, or receipt of the securities and delivery of the
purchase price, in the case of a purchase. When a customer of
petitioner sells securities that are not held by petitioner in
street name,3 the certificates must be properly endorsed and
received by petitioner by settlement date. If a customer of
petitioner already has sufficient funds in his or her account,
petitioner automatically uses these funds on the settlement date
to pay for securities purchased, even though the confirmation
indicated an amount due. If petitioner does not receive payment
for securities purchased by the customer by the settlement date,
3Securities are said to be carried in "street name" when
they are held in the name of the broker instead of the customer's
name. Holding securities in street name allows for ease of
transfer by the broker and convenience to the customer, because
it avoids the necessity of obtaining the customer's endorsement
to transfer the security.
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Last modified: May 25, 2011