Hi, IJ:
What I was specifically referring to was firms that permit customer traders to trade nearly ad infinitum and then, for some preset rate
($50.00 per $100,000 per day for example) cover their margin calls for them. The problems arise because:
a) brokerage firms are prohibited from doing this (REG T issues, commingling brokerage and customer funds, and a plethora of other rules);
b) some firms have reputedly journaled inactive customer account balances into active customers' accounts to cover margin calls (without the inactive holders notice!), and
c) it encourages people - regardless of experience, etc., to take and hold positions they can't handle for the purposes of generating ticket volume, which is contrary to any broker-dealers fiduciary duty.
10:1, 20:1, etc. leverage is prohibited to registered traders trading proprietary funds, and to the best of my knowledge...a customer trader, investor, etc., cannot be afforded any more than Reg T's specifically defined 2:1. Whether or not certain firms are allowing unregistered customers to trade with leverage in excess of Reg T I don't know. |
