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Monday, October 05, 2009

What is Counterparty (CP)

What is CP in investment terms? This is a question posed by a friend who just purchased her first 1,000 shares. I was shocked to find POEMS actually displayed CP to investors. I thought CP should be transparent to investors and its significance is irrelevant.

So what is CP? We should really ignore CP (Counterparty) since it should be handled by the platform of a brokerage house (in this case POEMS). Some may see UBS Securities, OCBC Securities, or some other brokerage houses as the transaction's CP. In any transaction, there must be a pair of willing buyer and seller. If CP is UBS Securities, this means shares just owned was sold by a investor using UBS Securities platform. This piece of information is insignificant.

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