All over the web, people are blaming today's more than 4% sell-off in Apple (AAPL) on a clearing firm named COR Clearing raising its margin requirement for Apple positions from 30% to 60%. While scores of investors debate whether or not this is true, I think it is more productive to ask the questions, "Who does COR Clearing clear for?" and "Should I care about a margin-related sell-off in Apple?"
The first thing I did when I heard about a possible COR Clearing margin-related sell-off in Apple was to check who the majority of well-known brokers clear for. The website Online Broker Review (onlinebrokerrev.com) lists the clearing firms for the following brokers: E*Trade, eOption, Fidelity, Firstrade, Interactive Brokers, Just2Trade, OptionsHouse, optionsXpress, Merrill Edge, Schwab, Scottrade, ShareBuilder, SogoTrade, TD Ameritrade, TradeKing, Vanguard, Wells Fargo Advisors, and Zecco (merged with TradeKing).
According to Online Broker Review, not one of those brokers uses COR Clearing. COR Clearing did recently announce that it will acquire Apex Clearing Corp. (created by Penson Worldwide and PEAK6 Investments), which, according to Online Broker Review, clears for eOption, Firstrade, OptionsHouse, SogoTrade, TradeKing, and Zecco. But that is not scheduled to be completed until early 2013 and shouldn't have had an effect on today's news about COR Clearing.
COR Clearing describes itself as a "leading independent securities clearing firm." It was born out of the acquisition of Legent Clearing by COR Securities Holdings Inc. The January 3, 2012 press release announcing the acquisition described Legent's "current client correspondent roster" as including "more than 75 broker/dealers." If Legent's 75 or more broker/dealers for whom it cleared couldn't generate enough revenue for it to survive and thrive on its own, how much should Apple investors care that the new Legent (COR Clearing) is hiking margin requirements?
Also, are COR Clearing's investors big enough fish in the sea for Apple investors to worry about over a longer period of time? My hunch is that the answer is "No." But since this news just broke this morning, I haven't yet had an opportunity to investigate just how big COR Clearing's clients are. With that said, COR Clearing's website does provide quotes from some of its clients, among them Newbridge Securities Corporation, Perrin, Holden & Davenport Capital, A&F Financial Securities, and WestPark Capital, Inc. This may help you research further just how big some of COR Clearing's clients are.
In terms of Apple's stock, I think the more significant news is that it failed in recent days to trade back above its all-important 200-day simple moving average. As I've written about before, Apple's 200-day moving average had been a rock solid support level since the 2009 lows. Apple's stock broke through that level on November 2, tried and failed to get back above it on November 5 and 6, and then failed again on November 29 and December 3. In my opinion, Apple investors should pay much more attention to that major support level now turned resistance level.
Clearly, a case can be made based on Apple's fundamentals that the stock should be trading much higher. But for now, things such as margin hikes, technical analysis, taking profits ahead of possible tax rate increases, and financial markets in which short-term momentum trading reigns supreme will dictate how Apple's stock will perform. The fundamentals behind Apple's business will once again have a chance to take over when the company next reports its earnings in early 2013. And it better not disappoint. After two quarters in a row of disappointing earnings reports, I think Wall Street will be less forgiving if Apple makes it three misses in a row. As I mentioned in my October 26, 2012 article, Why Apple Is Still A 'Don't Buy, "For fundamental catalysts to drive Apple to new all-time highs, and for the stock to experience multiple expansion, it will need to prove to Wall Street that it can once again blow away the earnings estimates."
If you are an Apple investor hoping for new all-time highs, you will need a stellar earnings report in late January to make that happen.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.