Noob question ~ Online Trading

[desiresale]

I'm a fresh noob in stock trading. When i login to my newly started Kay Hian internet trading account, there was Buy Limit and Sell Limit of $50,000 each?

How does the two limits work? What do i have to take note of?

Thanks for all the expert advice

 

[Maeda_Toshiie]

I'm a fresh noob in stock trading. When i login to my newly started Kay Hian internet trading account, there was Buy Limit and Sell Limit of $50,000 each?

How does the two limits work? What do i have to take note of?

Thanks for all the expert advice

That means on a single day, you can buy up to $50000 worth of securities, and sell up to $50000 worth of securities.

 

[desiresale]

Assuming i put in a sell request for $50,000 worth of securities, and the request is filled. In the same day, i still cannot sell further?

That means on a single day, you can buy up to $50000 worth of securities, and sell up to $50000 worth of securities.

 

[Darkzi0n]

Assuming i put in a sell request for $50,000 worth of securities, and the request is filled. In the same day, i still cannot sell further?

call hotline to expand ur limit temporally/permanently

 

[RobinTeoHood]

Newbie they give 50k credit so much?

Sent from Space using GAGT

 

[Shiny Things]

I'm a fresh noob in stock trading. When i login to my newly started Kay Hian internet trading account, there was Buy Limit and Sell Limit of $50,000 each?

How does the two limits work? What do i have to take note of?

Thanks for all the expert advice

So this is a weird, dopey feature that's unique to the Singaporean stock market.

In most countries, your stocks and your cash are held in an account at the broker, so the broker can see what you own, and how much you can buy or sell.

In Singapore, the broker generally doesn't touch your stocks or your cash - the cash gets paid through EPS on the settlement date, and the stocks settle into CPF, which the broker can't really see into. So the broker can't see how much money you have to spend on stocks, and they can't see what stocks you own (so, how much you can sell).

This is pretty dumb, let's be honest! But that's why you have a buy and sell limit - because the broker can't see how much money you have to spend, or how many shares of stock you own, they have to put an arbitrary limit on how much you can buy and sell each day. If the limit wasn't there, you could buy fifty gigazillion dollars' worth of Amalgamated Pennyfarthings LLC and then just not pay up three days later; or, worse, you could sell fifty gigazillion shares of Amalgamated Pennyfarthings LLC, completely tank the company, and then three days later say "um no, I don't have fifty gigazillion shares to deliver, why yes I am currently on a plane to a country with no extradition treaty how did you guess".

This is also known as the O'Hare Spread, because in its original Chicago incarnation you'd buy or sell hundreds of thousands of futures contracts, and at the same time you'd buy a ticket from Chicago O'Hare airport to somewhere like Rio de Janeiro, with nice weather and no extradition treaties with the USA. If the position goes your way, you close it out at a gigantic profit and tear up the plane ticket; if it goes against you, well... you head to the airport and let the clearing firm sort out the mess.

 

[alexchia01]

So this is a weird, dopey feature that's unique to the Singaporean stock market.

In most countries, your stocks and your cash are held in an account at the broker, so the broker can see what you own, and how much you can buy or sell.

In Singapore, the broker generally doesn't touch your stocks or your cash - the cash gets paid through EPS on the settlement date, and the stocks settle into CPF, which the broker can't really see into. So the broker can't see how much money you have to spend on stocks, and they can't see what stocks you own (so, how much you can sell).

This is pretty dumb, let's be honest! But that's why you have a buy and sell limit - because the broker can't see how much money you have to spend, or how many shares of stock you own, they have to put an arbitrary limit on how much you can buy and sell each day. If the limit wasn't there, you could buy fifty gigazillion dollars' worth of Amalgamated Pennyfarthings LLC and then just not pay up three days later; or, worse, you could sell fifty gigazillion shares of Amalgamated Pennyfarthings LLC, completely tank the company, and then three days later say "um no, I don't have fifty gigazillion shares to deliver, why yes I am currently on a plane to a country with no extradition treaty how did you guess".

This is also known as the O'Hare Spread, because in its original Chicago incarnation you'd buy or sell hundreds of thousands of futures contracts, and at the same time you'd buy a ticket from Chicago O'Hare airport to somewhere like Rio de Janeiro, with nice weather and no extradition treaties with the USA. If the position goes your way, you close it out at a gigantic profit and tear up the plane ticket; if it goes against you, well... you head to the airport and let the clearing firm sort out the mess.

Singapore brokers have the buy/sell limit, NOT because of the stocks are held in CDP.

In fact, brokers do know how much stocks you have because they have trade history.

The main reason for the limit is because of the T+3 day settlement rule.

Buyer need NOT pay for their purchase after 3 days. This create a problem where some clients brought a lot of stocks without paying a single cent and refuse to pay after 3 days. The broker are then force to sell at market and result in a loss that they have to bare.

To prevent huge losses from new clients, which they not yet trust, they'll impost a small buy/sell limit to protect themselves. After they trusted you, they'll increase the trade limit to whatever you requested.

My starting limit was $10,000. After I traded a couple of times with my broker, I told him that that was too small for me and he increased it to $300,000.

However, because of this unique feature, Singapore has a group of unique traders called Contra Traders. These people try to make money by buying and selling within the 3 days settlement date, thus making money without having money. Please note, T+3 is the standard, but if you have good relationship with your broker, you can stretch it to T+5. There are Contra Traders who can hold for 5 days. This is something most countries do not have.

 

[Mecisteus]

Singapore brokers have the buy/sell limit, NOT because of the stocks are held in CDP.

In fact, brokers do know how much stocks you have because they have trade history.

The main reason for the limit is because of the T+3 day settlement rule.

You can buy from broker A and sell through broker B. So how can both brokers keep track of both transactions? Assuming shares are held in CDP.

What Shiny Things mentioned is correct. The sell limit is there because brokers don't know how much shares you have. There is a buy limit because brokers don't know how much capital you can really afford to pay.

The limits are there from a risk management point of view.