Although they will probably not affect me personally,,
I believe that it is an unfair practice and should be prevented.
I am a part time trader. I day trade about half of my trades. I also invest and enter intermediate term (2-30 days) trades. Trading has been profitable for me. But it was not always that way. I started trading with $7,000 in cash and $11,000 in equities as leverage. I made a little bit of money, lost a little, made a lot and lost a lot. At one point in time, my trading account was down to $4,000. With some determination and some help from excellent teachers, I clawed my way back, with day trades and intermediate trades. My trading portfolio now exceeds $100,000. What good reason can be given, to not allow me this opportunity ?
This proposed margin rule, should be looked with a most suspicious eye
The NYSE and NASD say that by rasing the margin requirement it will "address the risks associated with the practice" (of day trading). That implies that if you have $25,000 you are more able to understand the risks than if you have say $10,000. This forces a new trader to risk more money than otherwise would be necessary. The reasoning does not make sense.
The market making specialist firms go on television and complain about volatility caused by day traders, yet this proposal, on its surface would seem to add to the volatility because of the increased buying power, and the need to close positions before the market closed. (positions that would have otherwise never been entered.
These same firms say that day trading hurts investors. The reality is that in the long term a stock will live or die on the companies own merits, regardless of the trader. Every one on wall street knows this. If an investor is looking long term, the day to day fluctuations are of minor concern.
I believe that the motive is in reality to drastically reduce the number of day traders. This in turn will allow the market making firms and the specialist to return to their once lofty position of omnipotence. A status infringed upon by the modern day trader.
Yes any trading is high risk. Most day traders loose money and fail. This is no different than starting any small business; most fail. Yet we do not say to a small business start up you have to have $40,000 or you are not allowed. That is exactly what the new proposal is doing.
And take note, that the reality is that under the new rules a new trader must start with at least forty to fifty thousand not the twenty five, for a trader must expect to loose some money as they learn. It is no different than any other business, you loose money at first.
There will be other consequences of this proposed rule. They will include:
By increasing the minimum balance, a new trader is forced to risk much more money than would otherwise be necessary.
A trader could be forced into holding a loosing position, or not taking a profit on a winning position that they entered that day, to avoid being declared a day trader, then having to come up with a large sum of money.
The 4:1 capability encourages traders to take larger positions and increase their risk. The exact opposite of what a newer trader should do.
In closing, I respectfully encourage everone to take action to halt this proposal. It is designed to benefit the large established firms and people with a lot of money, while locking the small guy out. It is wrong.
Thank you for consideration
Harry R. Alexander
Pittsburgh PA
To contact the NYSE:
Go to: nyse.com
Then click on the "Contact us" button.
To contact the NASD
Complete instructions for submitting comments: nasdr.com
SEC.
Filing for the new margin rule has not been completed. The SEC takes comments on all proposed rules and they are entered into official records and made available to the public. You can send in comments now, but the SEC needs to have a file number of the proposal. You may need to send it again once the filing is complete.
Instructions for submitting comments to the SEC: sec.gov
To contact the US Senate, contact any or all of the following, url for email follows:
US Senate Banking Committee
Phil Gramm (R-TX), Chairman
Subcommittee on Securities
Rod Grams (R-MN), Chairman
Jim Bunning, (R-KY), Vice Chairman
Richard Shelby (R-AL)
Wayne Allard (R-CO)
Robert F. Bennett (R-UT)
Chuck Hagel (R-NE)
Rick Santorum (R-PA)
Mike Crapo (R-ID)
Christopher J. Dodd (D-CT)
Charles E. Schumer (D-NY)
Evan Bayh (D-IN)
Tim Johnson (D-SD)
Richard H. Bryan (D-NV)
Jack Reed (D-RI)
John Edwards (D-NC)
senate.gov
House Committee on Banking and Financial Services
Jim Leach Chairman (R IA)
house.gov
Subcommittee on Capital Markets, Securities and Government Sponsored
Enterprises
house.gov |
