brokerages need to have cash on hand to loan. they can partner with a bank, or it can come from their own balance sheet or investors, but it's not printed out of thin air.
In practice, aren't almost all of them either a bank themselves or partner one or more banks and auto-sweep customer deposits into these 'program banks'?
Sure it might be slightly more convoluted, but at the end of the day isn't this still customer deposits funding margin/loans?
Sure it might be slightly more convoluted, but at the end of the day isn't this still customer deposits funding margin/loans?