And for that matter, how can bankruptcy even matter? These are all funds that live in a separate bucket from the rest of operations. Even in a bankruptcy, they wouldn’t disappear (like your coat at a dry cleaner’s.
[1] Recall the comment about how you’re implicitly supposing a “credible lockup of funds” primitive, which has a strange structure, on closer examination: https://news.ycombinator.com/item?id=27694540
1. the collateral is good because it's transferred/wired on the day of purchase.
2. as mentioned in my previous comment, that could theoretically be done today (ie. "trust me, I can definitely come up with the money on the day of settlement"), but it's not done for various reasons.
>And for that matter, how can bankruptcy even matter? These are all funds that live in a separate bucket from the rest of operations. Even in a bankruptcy, they wouldn’t disappear (like your coat at a dry cleaner’s.
but in the scenario mentioned above, how are you going to recover the funds? specifically, from where are you going to get the money to make the seller whole?
I think what you're trying to ask is that if clearinghouse somehow knew that a given buy order would be good (ie. was paid with settled cash), then this whole fiasco wouldn't have occurred. That's true, and that's essentially what T+0 settlement is (ie. you have to come up with all the money on the day of trade).