Is this how Wall Street works?
I'm not saying this is all jobs on Wall Street but I am wondering if this is how it works in general.
You are an individual. You make deals with other people. Sometimes you make money, sometimes you lose money. You get paid money if you make money with some deals but you don't have any liability if you lose money on the other deals. So, at the end of the day(or year), there is unlimited upside to your salary or commission and little to no downside.
Here is an example.
You have a stock pick. You have 100 clients. You tell 50 of your clients to buy the stock because you want them to think it will go up. You tell the other 50 clients to short because you want them to believe the stock will go down. At the end of the day, based on how the stock price went, you made money for half of your clients in which you will get a bonus and lose the same amount of money with the other half in which you personally do not have to pay back and have no liability. Ultimately, you share the fruits with the winners but do not share the pain with the losers.
How is my analogy?
I think that's a pump and dump. I've never worked on a S&T desk, but that will put you in the can with the SEC.. at least it will if you're caught. Don't do that. Were you reading Liar's Poker or something like that?
Isn't a pump and dump when you buy something like a penny stock and sell it after you hype it up yourself? In my example, the stock price is based on the free market and the broker has no influence on the price.
From what I understand, it's a scheme where the broker attempts to inflate the price of a stock. It doesn't matter how you profit from it, fraud is fraud.
yeah, you've defined 'pump and dump' correctly
what you are describing is a con...and an old one at that...which is also known as fraud.
While there are some unscrupulous brokers out there that perpetrate this crime (more so 20-30 years ago) this is NOT how the majority of wall street operates.
Add in the fact that clients will repeat business,. Add in the fact that you may have (as a stockbroker, which is your example) extremely low base salary, but have expensive fixed living costs. Add in the fact that you can get fired.
This is not how it works. Your clients will be short lived if you treat them this way. Without clients you are without money, and without money you are without a job. That is downside risk. Maybe you keep your job, but are paid poorly. Even if your poor pay is enough to keep you afloat, if it is less than the next best available opportunity, that is also downside risk.
You are very far off the mark.
You just described fraud.
thinking this has to be a troll... lol
"How is my analogy?" Bad.
No. That's a politician
Lol, OP's example is retarded but there no question moral hazard exists in many areas of finance. How do you think the financial crisis happened?
As any Series 7/79/63/etc holder would know, right off the bat, you are violating FINRA's suitability rules and would lose your ability to work in short order. http://www.finra.org/industry/suitability
^^ yup.
It ain't like Boiler Room and hasn't been for some time.
It also sounds like a great way to cut your client base in half with every trade. Yeesh.
this is exactly how M&A works
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