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Trading Funds - Westpac Broking

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igz88

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Hi,

I bought about 30k worth of stocks a couple of weeks ago. As soon as the settlement day came and I was 'CHESS registered', my trading funds amounted to my portfolio value of around 22k. I've only got 1k in my actual trading bank account but on Friday I bought 5k of BHP stock - which got deducted fromthe portfolio value, bringing down my 'funds available for trading' down to 17k. (the 1k in my bank account remained).

So In summary my 'Trading Funds' are as follows:
CASHMG Account - 1K
Reserved Ammount - $0
Portfolio Value - $22K
Trading Account Balance - -$5,000 (the BHP purchase)
Value of Open Buys - $0
Funds available for trading - $17K

Basically I rushed into making a BHP purchase on friday because I felt it was a good buy. I obviously didn't investigate into who/what was actually going to pay for the purchase....

When I go into my 'Holding' tab, down the bottom it says 'Ledger Balance' -$5,000 (im not sure what that is)

In my contract note, it says (just like with all my previous purchases) that my bank account will be debited on specified settlement date. Now as I have said, I have only 1K in my bank account, which is obviously not enough to pay for the stock purchased.

My questions are:
1. What the hell is going to happen on settlement day as I dont have the funds to pay?
2. Why did Westpac broking let me buy the shares If I don't have the money to pay for them? (Obviously I am an idiot by not investigating but at the time I thought it was like a margin loan or something)
3. Later after going through the Westpac broking website I realised that you actually have to sign up separately for Margin lending and I've never done that - which is the main reason I am so paranoid right now - especially since the contact note said that it will be debiting my bank account which doesn't have the appropriate funds...)

Basically can someone please explain to me what is going to happen and whether I have just made a very big mistake. And why does Westpac broking let you buy shares with money you dont have - I could by $17k more shares according to them but I have only $1k in my bank...

I would appreciate some assistance!

Thanks in advance.
 


igz, firstly the -$5000 Ledger Balance represents any unsettled buys. If you look at your holdings, you will notice that in the Market Value column for that stock is $0 and CHESS Holding will also be 0. This is because even though you have purchased the stock its not yet settled. This will take place usually 3 days + 1 after the purchase.

What will happen now is that Westpac will charge you Account Overdrawn Fee of about $35-$40 and a daily interest until the funds become available.
 

Ok thanks. I thought this would happen. I guess the only logical thing to do is sell them before settlement (which is on the 8/7).
 
yep. you better sell quick fast if you don't have the money to pay for it.
 
Doesn't Westpac have a demo video that you can watch before doing any actual buying?
Please don't say yes they do, but you didn't think it necessary to take a look at it.
I hate to think what sort of trouble you can get into if you're so casual about knowing what funds you have available.
 
igz88. Sell all of your stock and transfer all of your cash to me. I will look after it for you. For a small fee of course *wink* This way you will not have to worry about posting in here. Just PM me and I wil take care of it all for you. *wink wink*
 
trainspotter said:
igz88. Sell all of your stock and transfer all of your cash to me. I will look after it for you. For a small fee of course *wink* This way you will not have to worry about posting in here. Just PM me and I wil take care of it all for you. *wink wink*
Click to expand...

NO!

Diversify, that is the key.

Give half to trainspotter and half to me.

On a serious note, the bank did nothing wrong. All brokers allow clients to purchase a certain amount of stock without having the funds in their account. This is because you have 3business days to deposit the money.

In your case you have purchased(previuosly) $30k of shares and paid for them on time. The bank now feels comfortable that you can purchase up to $22k without having a deposit, as you have paid up previously.

It was clearly your mistake, and i feel in most cases the late payment fee and interest charges are insufficient deterent. At a bare minimum i hope they remove your 'privilege' of buying without having the funds present, and maybe your credit history can be impacted as a lesson to you.

When you realised what you did, why didnt you sell the stock or some of your other $30k. If you did that on the same day the 2 transactions would cancel.
 
I am happy to share with you nathanblack. Good response by the way. I have bought shares with a +- 3 day call. Shares have gone up, sold them and walked away with the profit. Balls of steel it took. Not talking about vast sums of money either. Couple of grand at a time. (invested that is, not profit) Have to make sure you have enough cash liquidity to cover call or other shares to off load to cover debt. Worst case scenario share purchase heads into negative territory. Sell the share and cop the loss. Risky I know but makes for a helluva time.
 
I dont want to hijack this thread but i have a similar question. I have some shares that are yet to settle and as such do not show on my westpac holdings except under unsettled section. So am i able to sell these before settlement.
Also if you can sell
are the funds deposited straight away as apposed to the 3 day settlement for buys.

Thanks
 
No & No

However there are fees for early settlement which you can factor into your trading plan.

You can offset trades if it is within a certain timeframe.

read T&C's from westpac
 
you can sell the shares before they show as chess registered or settled (also
trade with westpac) only thing is you may still need to have
the right funds available on settlement date, as selling these
will be after the initial buy.

jc
 
Im abit confused. sorry if im a abit thick\very newbish.

Im currently waiting for my westpac broker account.

So when i want to buy stocks at its current price and put an order in. I have to wait 3 days before i own those stocks?

If so does this mean i cant go selling those stocks until i own them? or can i sell them in the same day and still make a profit (if the stock price goes up)?

thanks in advance
 

On completion of your purchase you will receive a contract.

The contract will provide you with a settlement date and you need to have the funds in your account on this day.

You can sell those shares at any time after their purchase and before settlement if you choose.
 
What other broker's apart from Westpac will allow a newbie to buy stock without having enough in their cash account to cover it?
 
Some brokers will have a limit to the amount of shares you can buy without any other holdings, eg $7500 of any blue chip stock, this still has to be settled after 3 days, T+3. When you have other holdings you can buy the amount you request, as the broker has the other shares registered that can be sold if the sale process defaults. I would suggest you contact Westpac to see if you can avoid the default fees, but something from your holding will need to be sold to cover the cost of the BHP trade. - Just realised the date...hope the sale went well
 

How long does this contract process usually take? What this newbie doesn't get is how this fits in with scalp or short-term swing trading.

Is this right:

I buy 5000 shares in a blue chip at $X at 11:30, and sell them at $Y at 11:43. Who owned the shares for the 13 minutes? I couldn't have possibly received a contract in that time. Are you saying that win lose or draw the bank and I have three days before the money is transferred?

Thanks in advance...............!
 

Technically you own the shares for the 13 minutes.
 
I've been using Westpac Broking for years, I recently forgot to transfer money into the acc that settles my broking within the 3-4 days timeframe, Westpac bank immediately "fined" me $35 as they do with any acc.s/ credit cards overdrawn etc.
Westpac Broking sent me a letter & email warning me to make the funds available within 2 days else I would be charged $150 fee plus shares in my portfolio could be sold at their discretion to cover the amount owing plus some percentage as admin fees etc.
I immediately made the necasary transfer & got myself out of hot water but they were relishing the amount they were going to hit me up for I'm sure.

You can't take a nap when you're dealing with these sharks (banks), so read the fine print & check your acc.s & emails everyday.

PS: Westpac & Westpac Broking operate as separate entities so if you make a mistake you will be scr3w3d from both sides
 
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