aurora,
You seriously think it is so easy for the broker to get you in on short gain to churn you. You are assuming that each time the broker gets you to trade, the market will surely go in favour by at least two ticks after the transaction. If he that accurate why churn you. He can churn his own proxy account. He get the comm and trading profit. Why should he bother to give you a phone call (more expenses).

Ellimist,
An excution broker is a member of the exchange (Busra Derivative Malaysia) but not a member of the clearing house (Malayisan Derivative Clearing House - I am not sure if this organisation has a malay name today).

If you are not a memeber of the clearing house then you cant clear the trade but can execute (buy or sell) it provided you are a member of the exchange. It cost a lot (in deposits) to be a member of the clearing house because you have to guarantee the trade (meaning if the other party dont pay - you pay through your deposit). Memeber of clearing house not only guarantee an individual's trade but that of exchange members who are not clearing house members.

Trades are matched at the moment of excution. Clearing ensures the trade are guaranteed. There is a buy and a corresponding sell. If the buy side backs off from the deal, who is going to buy? In this case the clearing broker will have to buy. Although theoratically the ultimately responsibility will rest on the clearing house. That is what guarantee-ing the trade means. As mentioned earlier, clearing house members had to deposit a large sum of money (if I remember correctly the minimum amount is 10 millions) with the clearing house to be clearing house members to ensure they could meet this obligation. If the sell side does not deliver the same analysis applies.

There are about 4 small future brokers who are not members of the clearing house. There is nothing wrong with not wanting to tie up too much cash in deposit with the clearing house so they "tumpang" other clearing member.

I do not see a disadvantage with this where excution is concern because trades are match on execution. The only possible disadvantage is they may charge you higher commission because they have additional transaction cost when they "tumpang" someone to guarantee their trades.

This post has been edited by faceless: Jun 24 2010, 09:39 AM