Posted in Finance, Accounting and Economics Terms, Total Reads: 407
Definition: Parking (Money)
An investor may decide to invest her money into safe money market instruments until she decides where to invest ultimately. This is the process of ‘parking’ the money. Generally low risk instruments or highly liquid securities are used to park money, until final investment decisions are taken for short or medium term.
Another parlance where money parking takes place is the illegal activity of a firm/individual holding stock on behalf of another company in order to obscure the real party’s ownership. For example, an investor holding more than 5% of a particular stock needs to register with the securities exchange but through parking the shares with accomplices. This way the acquisition intent of the investor is not revealed directly. Parking for this purpose is treated illegally.
In brokerage firms, parking occurs when a brokerage tries to hide undeclared short positions from the stock not transferred on the settlement date. Instead of settling by a buy-in firms may collude to delay settlement process and thus illegally inflate the number of shares available in the secondary market.