Special memorandum account
Imagine you have a piggy bank where you keep your money. You also have a special account called the Special Memorandum Account (SMA) in a bank. This account is like your piggy bank, but for big people who trade stocks and bonds.
When a big person like a stockbroker wants to buy stocks, they need to have enough money in their account to pay for it. Sometimes, they don't have enough money in their account, so they borrow money from the bank.
Now, the bank is not just going to give them money for free. They will charge the big person interest on the money they borrow. This means the big person has to pay back MORE than what they borrowed.
The Special Memorandum Account comes in handy here. The big person deposits some of their own money into this account as a form of collateral or security. This means that if they can't pay back the borrowed money, the bank can take the money from the Special Memorandum Account to pay back what they borrowed.
In conclusion, the Special Memorandum Account is like a piggy bank for big people who trade stocks and bonds. It's a type of account that helps them borrow money from the bank, but they have to deposit some of their own money as collateral.
When a big person like a stockbroker wants to buy stocks, they need to have enough money in their account to pay for it. Sometimes, they don't have enough money in their account, so they borrow money from the bank.
Now, the bank is not just going to give them money for free. They will charge the big person interest on the money they borrow. This means the big person has to pay back MORE than what they borrowed.
The Special Memorandum Account comes in handy here. The big person deposits some of their own money into this account as a form of collateral or security. This means that if they can't pay back the borrowed money, the bank can take the money from the Special Memorandum Account to pay back what they borrowed.
In conclusion, the Special Memorandum Account is like a piggy bank for big people who trade stocks and bonds. It's a type of account that helps them borrow money from the bank, but they have to deposit some of their own money as collateral.