Word: contango
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Dates: during 1930-1939
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...Paris, Amsterdam and Brussels) brought them business from residents of the U. S., who lived in a foolish country where it was necessary to put up 55% margin on the purchase of stocks bought on speculative account. London only wanted 20% or 25% and, in many cases, ran contango accounts with no margin at all.* So London took all these commissions from New York and, by a process that is a little obvious today, shouldered what should have been New York's losses. It may have been that London only got New York's 'bad' accounts...
...London, in contrast to New York's daily clearance and settlement by 2:15 of the following day. Purchasers may buy a stock on the account's opening day, advance no money until settlement time. However, during this period they must pay an interest rate or "contango." Contango is in general based on prevailing rates, but stocks with a large bull account command a higher contango, very speculative shares cannot be contangoed at all. There is no contango when a large bear interest exists but bears must pay a premium known in London as "backwardation...
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