Template:Unallocatedtrades: Difference between revisions

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-A legal conundrum most relevant in the context of [[agency]] orders for [[securities]] and [[derivatives]] placed with a [[broker-dealer]] by an [[asset manager]] in bulk on behalf of several clients. Typically the [[agent]] will place the order first, and advise the [[executing broker]] of the identity of the [[principal]]s to whom the securities should be allocated later in the day. [[Agent]]s will often proudly declare that at no time, in no circumstances, can they ever be liable as a [[principal]] for transactions they instruct on behalf of their clients.
+A legal conundrum that arises in the context of bulk [[agency]] orders placed by an [[asset manager]] with a [[broker-dealer]] on behalf of several clients. Typically the [[agent]] will place the order first ''without'' naming the [[principal]]s, only to advise the [[broker]] to which [[principal]]s it should allocate the securities later in the day.
-The question arises: who is liable for those executed transactions ''in the mean time''? The [[broker]] doesn't know who the [[principal]] is, so can hardly take up matters with it directly. On the other hand, [[asset manager]]s will hotly deny any kind of personal liability, appealing to their regulatory status, meagre capitalisation, or sheer importance as a valued client in intimating that this risk ought to be the [[broker]]'s problem.
+[[Agent]]s will often proudly declare that at no time, in no circumstances, can they ever be liable as a [[principal]] for transactions they instruct in this way on behalf of their clients.
+Oh ''really''?
+This convenient view — I mean, you would say that, wouldn’t you? — prompts more questions that it answers: if the [[agent]] isn’t responsible for unallocated trades, then ''who'' is? Until they’re allocated, then who, ''in the mean time'', is? The [[broker]] doesn’t know who the [[principal]] is, so it can hardly take up matters with it directly. On the other hand, [[asset manager]]s will hotly deny any kind of personal liability, appealing to their regulatory status, meagre capitalisation, or sheer importance as a valued client in intimating that this risk ought to be the [[broker]]'s problem.
 So much bunk — all of these reasons. The [[manager]] is the agent chose not to disclose its [[principal]]. By doing so it accepted unconditional responsibility for settling its client’s transaction.