Monday, January 21, 2008

A Margin Facility I Didn't Ask For

As part of the process of diverting more money to ETFs, I had to open a brokerage account with my bank's broking subsidiary. I received back a number of documents today, including a notice that I have been given a pre-approved margin facility - equal to about 2.5x the amount of money I deposited for my first investments.

At no point during the account opening process did the subject of margin trading ever come up, for the simple reason that I had no intention of trading on margin. If I want to borrow money, I will draw down more on one of the mortgages on my properties. The cost of borrowing is cheaper and I am not subject to the risk of margin calls. However, since it costs me nothing to keep the margin facility in place, I'm not exactly objecting and will simply leave the facility in place. That said, I really have to wonder about the bank's credit control practices.

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