overtrading

overtrading
Excessive broker trading in a discretionary account. underwriters persuade brokerage clients to purchase some part of a new issue in return for the purchase by the underwriter of other securities from the clients at a premium. This premium is offset by the underwriting spread. Bloomberg Financial Dictionary

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overtrade o‧ver‧trade [ˌəʊvəˈtreɪd ǁ ˌoʊvər-] verb [intransitive]
1. ACCOUNTING COMMERCE if a business overtrades, it does not have enough working capital (= available cash) to pay its creditor S (= people and organizations it owes money to) and employees:

• Directors of a tour operating company have to give financial guarantees which will be used if the company overtrades and then fails.

2. FINANCE if a broker overtrades, they buy and sell investments for customers more often than they should, in order to increase the amount of commission they earn; = CHURN
— overtrading noun [uncountable] :

• Before expanding, arrangements must be made for the higher cash requirements needed for this. If not, there is a risk of overtrading.

• The securities house imposed fines for overtrading habits that in fact were encouraged.

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overtrade UK US /ˌəʊvəˈtreɪd/ verb [I]
► FINANCE, PRODUCTION if a company overtrades, it sells more products than it can make, or more than it can afford to produce: »

The company was overtrading and running a risk of collapsing.

► STOCK MARKET to buy and sell shares too often: »

My broker was overtrading in order to make a higher commission.

overtrading noun [U]
► »

One big reason why funds underperform is overtrading.


Financial and business terms. 2012.

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