HSBC bans customers from buying Bitcoin-backer MicroStrategy shares
reuters.com
reuters.com
But you wouldn't be? This is a product literally called "InvestDirect" where private individuals are buying stocks and assuming all the risk.
If you don't want to offer margin on virtual currency products, more power to you, that is your risk. But if customers are buying with cash, it seems pretty suspect for the bank to claim that is increasing the bank's risk exposure.
Honestly it wouldn't be the worst idea to have a "Net Neutrality" for brokers.
and/or we could tokenize securities onto permissionless and decentralised ledgers and stop feeding the intermediaries
note that a ledger with transaction validation rules which enforce KYC can still be permissionless and decentralised
bitcoin isn't "permissioned" just because you need a valid signature to spend an output
That is absolutely not the case in a categorical sense.
Brokers can and do apply different margin requirements on a stock by stock or customer by customer basis. There's nothing out of the ordinary about a security not being marginable or having increased requirements due to risk assessment.
For example, here is a list of stocks at one broker with particular margin requirements, and it says it "changes frequently":
https://invest.ameritrade.com/cgi-bin/apps/u/MarginReq
Given that there are hundreds starting with "A", I'd assume the entire list is in the thousands, of securities that have individual margin requirements.
I think in fact the ticker GBTC which is a trust that owns Bitcoin isn't marginable.
https://www.tdameritrade.com/td-ameritrade-trading-restricti...
Here's another with GME and AMC:
https://www.schwab.com/margin-updates
But there are also lots of others you never heard of, that aren't mentioned.
It's the equivalent of security theater. Do something conspicuous that they can spin as having done something about the problem. That serves their purpose regardless of whether it actually does any good or makes any sense.
On top of that, cryptocurrency kind of competes with banks, so they have an excuse to cause trouble for the competition.
https://www.theguardian.com/business/2012/dec/14/hsbc-money-...
Yes, as an alternative to not allowing the trade.
If the bank considers something highly risky, it makes sense to protect themselves and the customer by making sure they've got some money locked up outside of the trade (a bankrupt customer is no longer a customer, after all). It would basically cap the percentage of net worth that they could put at risk, where they'd need to have $10 set aside for every $1 in the risky position.
HSBC are well within their rights to refuse to accept bad orders. HSBC are exposed to specific regulatory risk not shared by US banks. Having a ton of customers go bust because a regulatory change nuked some meme stocks seems undesirable to me. If you don't like it you can always find another broker.
It's like saying that net neutrality exists, because "if you don't like throttling you can find another ISP"
Says a lot about the 'risks' involved with that business model.
Cash trades still expose brokers to volatility due to settlement.
This policy is likely one part regulatory theatre and one part customer selection. Customers buying MicroStrategy stock are unlikely to be lucrative customers for the banking products HSBC hocks.
This doesn’t solve the problem of clearing collateral. That said, HSBC is a money centre bank. It isn’t worried about clearing collateral.
The policy is almost certainly a filter. If you’re trading MicroStrategy, you’re probably not a fit for their banking and wealth management services.
Naively, this would imply a fairly low premium. But among other things, this doesn't account for fact that Microstrategy took on a lot of debt to buy their bitcoins. Essentially, I'd like to see an updated and more complete analysis like this: https://old.reddit.com/r/microstrategy/comments/ltypps/sell_.... Does such a thing exist?
Pretty much the whole market has exposure to Bitcoin through SP500->Tesla at this point.
Tesla with a 2% market share in the US, is valued more than Toyota, Volkswagen, Daimler, General Motors, and BMW combined (40% of the domestic market).
Toyota makes about $2,500 profit for every car sold. Tesla would need to make $50,000 per unit sold on average, or basically 100% profit on a Model 3, to justify the market cap.
That said, I have a few friends who bought it's shares and their rationale is that it's a "clean energy play", far bigger than cars and that their brand is going to be as valuable as Apple. Only time will tell I guess, everyone can put their money where their mouth is and shorting Tesla has been a pretty bad proposition so far.
P.S. I'm not trying to convince anyone here of Tesla's value, I've shared some of my thoughts before, and there are plenty other people who have done a thorough job detailing the ecosystem and its potential.
First Tesla is growing fast so that $50k will drastically go down in the coming years.
Tesla is more vertically integrated so you have to include the valuation of all the dealerships, parts of their suppliers, the charging network, ...
And third there are the “other” businesses like the battery storage, solar roofs, software revenue, ...
So overall the numbers of cars produced is probably too simplistic to compare them.
I don't agree that it's a problem. Why do you think that a silly valuation is a problem?
Tesla has 100% access to the BTCs and other asset it holds but there is no access to the market cap. Its a fictive price tag on all existing shares. People use it to compare companies. The money does not exist anywhere and certainly can not be used by Tesla.
What exactly is stopping them from borrowing against their shares?
Eh, not really. They’re both stock (as opposed to flow) measures. And one is a subset of the other. That said, crypto as fraction of assets would be a more rigorous metric.
Not alt all. Mark cap is a fictive value. Assets hold by a company aren't fictive and are not part of the market cap at all. Market cap is simply the price of all stocks at the current market price of one.
>crypto as fraction of assets That would make more sense but also would need to include debts.
There’s a reason companies list “cash and equivalents” and BTC isn’t included in that line on the balance sheet.
depend on the liquidity on that day also they could OTC sell so yes they can probably get the market price. However telling the market fist isnt going to help.
>There’s a reason companies list “cash and equivalents” and BTC isn’t included in that line on the balance sheet.
Yes, the reason is volatility and uncertain liquidity. To compare BTC with cash equivalents you could use volume adjusted price over the last months, that would give a good short term cash value. But long term ofc its impossible to know what it may be worth.
Not quite sure how that's relevant to what I said, namely that assets hold by a company are not comparable to the companies market cap.
Ben Graham, one of Warren buffet's mentors, wrote a famous book called the "Intelligent Investor" which has several chapters on doing exactly that.
Think about it...if a company sells $10 billion in stock, the new stock adds $10 billion to their market cap and they get an extra $10 billion in cash which goes on their balance sheet. And likewise, a company can buy back shares and the reduction in marketcap from destroying shares is equal to the amount of cash assets being removed from the balance sheet. There's a link here.
https://www.investopedia.com/robinhood-latest-broker-to-rest...
If you don't like the situation, you can just buy the underlying asset (Bitcoin) and hold it in a cold wallet (I'm doing that).
My guess is that it's just some middle manager blindly following directives from 2018 that haven't been updated. I can't think of any other reason why they'd ban it when everyone else is moving in the opposite direction.
And I still didn't manage to open my bank account despite filling stuff out online and visiting a branch.
One of the unintended consequences of the Total Information Awareness / financial mass-surveillance AML/KYC movement is banks derisking at the expense of marginalized people and industries:
https://www.reddit.com/r/MakerDAO/comments/de0sys/kyc_is_abs...
https://www.koined.store/collections/out-and-about/products/...
Why would a software company buy this volume of this highly volatile crypto and put it on its balance sheet? Wouldn't the board object?
Yes it is. It's the job of banks to advise on these things.
It is a peculiar position they've taken, they've gone further than I think they'd have to, there's probably some reason for it that won't be very obvious on a non-financial forum.