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One more example with regards to the $25,000 minimum equity requirements for "pattern day traders". The rule is somewhat vague on this. I perceive that they want to be able to label certain Broker Dealers as day trading firms like Momentum Securities and be able to label all customers using that B/D as pattern day traders. They also want to be able to give 100% reliefe from these rules to institutions. One of the tests is whether you received day trading training from your broker. I use JPR Capital but received all my day trading trading from the school of hard knocks. I still think they would label me a pattern day trader anyways just because JPR Capital is a direct order entry broker or because they offer day trading training. Not fair in my opinion. So lets say my equity did slip under $25,000 because I got stuck in LU. I'm a pattern day trader so I am not allowed to be under $25,000. Lets also say that I originally bought $26,000 of LU a week earlier without using any margin at all. My credit is zero, but its in my margin account. Lets say my equity slipped to $21,000 because LU droped big time. I don't even have to be actually day trading to get a maintenance call for $4,000. I have 5 days to send them the $4,000 revised down from the current 7 days. In the meantime my day trading buying power under rule 2520 is reduced to 2 times my maintenance equity excess. My maintenance equity excess is $21,000. My equity % will remain above 25% even if LU went to 0. So my daytrading buying power is $42,000, whereas before it would have been $84,000 using the 4x rule. If by day 6 I don't send in the $4,000 they can't liquidate my LU because I didn't buy it on credit to begin with, but they will punish me for 90 days by making me trade on a cash available basis which means I have to always wait for settlement in T+3 I assume before cash is available from the proceeds of the last trade to roll into the next trade. I can send in the $4,000 after day 6 and get my day trading x4 restored and other margin restored. Now 90 days is supposed to clear the daytrader status but it seems like it wouldn't if you are at the same broker. |
