Is it possible to trade stocks with yourself?

Say you had two brokerage accounts and wanted to transfer the stocks (and more importantly cash) from the big money account to another account, without going through the ACATS process. As for why someone would want to do that, I am not going to go into that here. It does not matter why.

Here's my idea:

Find an obscure OTCBB stock or out of the money option with no reasonable asks. From the empty account put in a sell offer at an insanely high price, or alternatively just a couple cents below the moderately-insane ask. Perhaps in after hours trading. Then you go into your big money account and buy it at the inflated prices if you can positively identify your lot sitting there.

What are the flaws of this idea?

Obviously there's an element of risk in that someone else could place a sell order for a lower price during those few seconds it takes. Ways to deal with that I guess. Other than that the real problem would be able to just find the appropriate stocks or options with zero liquidity.

Thoughts?

Update:

JoeyV: It may very well be "idiotic", but if it's idiotic it has nothing to do with T+3 nor commissions. I have to disagree with your statement, "if you have any reason to do this, it's because you haven't thought very hard about the reasons"

There are PLENTY of good reasons. I did not say those reasons were legal. Nor am I asking if they are. I am simply asking if it is reasonably possible.

Update 2:

Yeah I can see where the answer trend is going, so I'll have to add the following clarifying tidbit. (I'd like to keep the question itself "on the level" though. Currently it is.)

The reason someone might hypothetically want to do this would be: It is simply not _possible_ or not desireable to do an in-kind transfer. Could be a lien, probate issue, would trigger substantial penalties, you name it. Use your imagination.

None of this is in the spirit of the original question and only serves to get this question that much closer to being yanked.

Update 3:

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What's really sad is that I saw the best answer ever, and I don't remember the guy's name but he sure answered the question. Then suddenly it was GONE. Either Yahoo canned it, or the gentleman decided to erase it himself. He knows who he is.

I'm going to say thanks right now to that answer.

6 Answers

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  • Anonymous
    8 years ago
    Best Answer

    The guy you cited is typically a jerk on these boards.

    I can't think of a reason why this wouldn't work. Single option orders are held at the exchanges. Spread option orders are held in an order book, which would make this more difficult. You are talking about a single option, though--or the stock. Normal stock transactions make good money for the market makers because of the wide bid/ask but you're trading outside the range so the only way the trade could occur would be with another retail customer willing to pay the "absurd" price.

    Source(s): Investing since 1987
  • 8 years ago

    In theory this can be done but in reality it may be very difficult.

    You don't need the ACATS system to move money although you could however, the broker moving the money out may have charge for all out going ACATs. It would be easier just to request a check then deposit the check with the other B/D or have the larger B/D send a check to the other B/D

    Now when you enter you order to buy the stock at a much higher price than the current quoted market, the B/D doing the buying for you is obligated by law to get you "the best" price. Buying at the higher price will cause regulatory problems for the B/D since they didn't buy at the "best' price.

    Problem comes when you have the B/D selling the stock at a much higher price, they would have to enter an offering for you in the trading system (pinks) and would they be willing to do this, the chances are they would not.

    You would have to get a B/D to accept you as a customer in order to have you "trade with yourself" no reputable firm will do this, nor would any small B/D that clears full disclosed through another B/D

    Also the problem B/Ds will have with what you want to do is not so much the trading of the stock, but the clearing of the transaction since such trades are done X-Clearing which requires the physical delivery of the stock from the selling firm to the buying firm

    If you're doing for tax purposes, it won't fly - it's fraud. I've had customers wanted this done, I wouldn't touch it.

    And I have seen this deal and it was done either to "clean" certificates that were not officially issued or clean counterfeit certificates. This deal is also used by small money launders to move currency or legitimize funny money into the system

    Good luck, I've seen this done (not in my B/D), didn't like then, don't like it now

    Source(s): from the street
  • Dave B
    Lv 6
    8 years ago

    Your answer is that it is pretty close to impossible to manipulate a market price of any publicly traded stock by using this strategy because there are too many faster players in the marketplace that have programs set up to recognize and exploit the arbitrage available between the different exchanges. You would absolutely have to go sell side first, but even then closing with the buy position will result in buying lower cost issues of the same securities first, which would be offered by those programs I am talking about - they will snipe you for just under your buy settlement, and you won't sell your security.

    This sort of thing has been tried on auction and reverse auction programs, so you can be assured the SEC also has sniffers developed specifically to look for this sort of trade.

    If it could be done, it would have to be executed by a pair of specialists working together on the floors of two different exchanges, and the opportunity would have to be kept low to keep the trade from surfacing and raising red flags right away on the different on and off exchange boards.

  • 8 years ago

    Wouldn't it be simpler and more secure to just transfer the stock "in kind" from one account to the other? That way there is no sale or buy involved, the ownership of the stock just transfers from the street name of one broker to the street name of the other broker. The stock certificates are not actually in your name unless you get the actual certificates (more expensive) in which case you could just take them to the other broker yourself.

    Doing it your way [unless in retirement account(s)] would either trigger a capital gain, or wash sale rule, depending upon whether you sold from the 1st account at a gain or loss. Your way is risky because you may end up buying someone else's stock at an inflated price.

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  • JoeyV
    Lv 7
    8 years ago

    You want to pay brokerage commissions and tie up your money for 3 days to transfer cash from one account to another? You aren't transferring stocks here, just cash.

    This is idiotic and if you have any reason to do this, it's because you haven't thought very hard about the reasons.

    Edit: I see nothing in your edit that doesn't make me more sure it's an idiotic idea. QWhatever those reasons are that you can't move stuff from the account don't in anyway justify fraudulent transactions.

  • Anonymous
    8 years ago

    Yes you do and trade your self but here you need help of some good broker.

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