No, when you tell a broker to buy $X of stock, they send a record of that purchase to a clearing firm. The clearing firm, in order to make sure none of the Brokers becomes insolvent before settlement, requires every Broker offer up collateral - it's collateral, it's not spent if everything goes well.
It's the SEC requiring brokers offer up insurance in case they explode.
Then, 2 days later, your actual money goes to the clearing firm and is exchanged for stock.
And this is why it’s confusing to the unsophisticated investor. Why didn’t they send my money in the first place? They can call it 100% collateral if they really want, but it’s basically payment up front. Once they get the stock I asked for, they take the money.
I suspect there are a lot more complicated trading mechanisms that take advantage of that 2 day gap that make my plan unfeasible though.
It's the SEC requiring brokers offer up insurance in case they explode.
Then, 2 days later, your actual money goes to the clearing firm and is exchanged for stock.