www.x-o.co.uk terms & conditions

MrMartyn

masonic wrote: »

Is this a wind up? I'm not sure how I could make that statement any simpler. Instead of following the course of action in the second point, they follow the course of action in the first point.

Thanks for coming back to me.

This is not a wind up. I am not trolling. I don't work in the City, nor even in the financial sector. I am a novice investor and am doing (or considering doing) this as a leisure interest in my spare time. Sorry if some my questions or statements seem dumb, but I'm learning this stuff as I go along.

I've been thinking about this some more, since the above replies. I think this stuff is easier to understand with an example rather than talking in more generic terms. Therefore, here's an example of how I imagine the sequence of events for this scenario could play out, based on my understanding of what you said:

1) I tell the broker to sell my 1000 shares in xyz plc for £1 per share (=total fee of £1000).

2) Broker finds a buyer who agrees to that price and transfers ownership of the shares to buyer.

3) Buyer then fails to pay.

4) Broker says "You are struggling to pay, so how about we buy the 1000 shares back off you, for £1 per share?"

5) Buyer says "OK."

6) Broker says "You already owe us £1000 so we will cancel that debt instead of giving you £1000"

7) Buyer says "OK."

8) Broker transfers ownership back to me and incurs some costs in doing so (e.g. stamp duty, trading fee).

9) Broker charges me the stamp duty + trading fee, but I don't have to pay the £1000 for the shares (because the broker has effectively paid that by cancelling the original buyer's debt).

For point 9), I guess the broker would charge me stamp duty (= 0.5% of £1000 = £5) plus the trading fee (at the time of writing this, trading fee = £5.95). Therefore my total liability for the repurchase would be £10.95.

It could get more complicated if the broker buys the shares back for a price that is different to the price I sold the shares at, but I've assumed it would be the same price for the sake of simplicity in this example.

Is the above example correct?

Thanks.

Disclaimer: I am not an expert. My comments are my opinions only and should not be taken as advice. Any information I post may or may not be correct, and should therefore not be relied upon as fact. If you act on anything I post here you do so entirely at your own risk. I do not accept any liability.

masonic

MrMartyn wrote: »

Is the above example correct?

Is it correct? If you are looking for a practical example of when this clause would be invoked, then I think you are wasting your time. In fact, there is absolutely no evidence that this clause has ever been invoked or will ever be invoked. X-O might be able to answer that question, but I have my doubts that they would be willing to satisfy your curiosity to that extent.

If you are asking whether the sequence of events you have imagined is plausible, then there are a number of things that perhaps bear mentioning. Firstly that the trade in (2) will likely be with a market maker or another broker, neither of whom are going to 'struggle' to pay, and if they became insolvent, would likely not be in a position to sell the shares back. Secondly, shares are not transferred, nor paid for, at the point of a deal being agreed; LSE operates on a T+2 settlement period. Thirdly, there might be some items in the LSE rule book that are pertinent to this situation, for example rule 5060 - but there could be others, so maybe you could have a read and let us know

At some point, perhaps you'll begin to question whether such detailed research on highly esoteric aspects of investing is necessary,

inflationbuster

Never come across any trade that has not been settled, ask them if it's ever occurred before ?

EdGasket

...and let us know what they say; if they can indeed answer these questions.