> What you just suggested is so illegal that no professional trader would have had the nerve to even mention it.
Why is it illegal?
At least from the outside, it doesn’t make sense. If I transfer money to RH to buy stocks, I expect that money to be used to buy the stock, when I buy the stock, whatever that process might entail. So if my purchase requires collateral because settlement happens later, then I would expect for my money to be used as collateral for my purchase and then be fully paid out once settlement occurs. Why wouldn’t it be that way? (if I’m not borrowing money from anyone).
Why is it illegal?
At least from the outside, it doesn’t make sense. If I transfer money to RH to buy stocks, I expect that money to be used to buy the stock, when I buy the stock, whatever that process might entail. So if my purchase requires collateral because settlement happens later, then I would expect for my money to be used as collateral for my purchase and then be fully paid out once settlement occurs. Why wouldn’t it be that way? (if I’m not borrowing money from anyone).