Chris Sacca, the $4M Negative Balance, the Salinger Group and Twitter (2015)

Re:Chris Sacca, the $4M Negative Balance, the Salinger Group... by throwaway833 on Thursday March 23, 2017 @01:18AM (#13937553)

Sgamblingtarting with around $10-$20,000 in what were college loans, Sacca realized that brokers weren’t accounting for margin usage on a real-time basis. The result was that even though firms were only allowing 50% margin, as long as a customer closed a trade before the trade settled, T+3, and showed proper equity in the account, positions larger than 50% margin usage could be opened.

So this guy bought stock on margin he shouldn't have been able to, because certain on-line trading systems at the time didn't check margin account balances in real-time. In effect, he borrowed assets with collateral he purported to have but in fact did not. This seems ethically questionable, at the very least, and possibly even fraudulent. But it's probably exactly the kind of "naughtiness" that YC prises in its founders:

4. Naughtiness

Though the most successful founders are usually good people, they tend to have a piratical gleam in their eye. They're not Goody Two-Shoes type good. Morally, they care about getting the big questions right, but not about observing proprieties. That's why I'd use the word naughty rather than evil. They delight in breaking rules, but not rules that matter. This quality may be redundant though; it may be implied by imagination.

Sam Altman of Loopt is one of the most successful alumni, so we asked him what question we could put on the Y Combinator application that would help us discover more people like him. He said to ask about a time when they'd hacked something to their advantage—hacked in the sense of beating the system, not breaking into computers. It has become one of the questions we pay most attention to when judging applications.

http://paulgraham.com/founders.html

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Re:Chris Sacca, the $4M Negative Balance, the Salinger Group... by elastic_church on Thursday March 23, 2017 @01:42AM (#13937610)

Protip: nobody calculates margin in real time accurately, especially when mixing option spreads across indices, stocks and futures in the same account.

Futures use SPAN margining and funds have to be moved behind the scenes but many brokers still report REG-T margin or the slightly more advanced Portfolio Margining which is capable of weighting the entire portfolio.

Ethically questionable? Who gives a fuck, did he make money or nah? The Fed, SROs, and individual brokerage firms set the margin limits. And when you are rich enough you can have your own lack-of-compliance officer and what-risk? manager

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