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Strategies & Market Trends : DAYTRADING Fundamentals
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To: LPS5 who wrote (6729)1/30/2000 7:28:00 PM
From: Dan Duchardt  Read Replies (1) of 18137
 
LPS5,

I've been trying for some time now to chase something down regarding Regulation T, and non-margin accounts. It seems particularly relevant to this discussion because of the definition lifted from the proposal

(i) The term "day trading" means the
purchasing and selling or the selling and
purchasing of the same security on the same
day in a margin account except for:
(a) a long security position held overnight
and sold the next day prior to any new
purchases of the same security, or
member organization.
(b) a short security position held overnight
and purchased the next day prior to any new
sales of the same security.

By implication, it is NOT daytrading if you buy and sell the same security in the same day, but do it in a cash (non-margin) account. However, many brokers will not allow you to repeatedly buy and sell in the same day, claiming that would be a violation of the regulations. I think I have come to an understanding of the implementation of that "rule", but I have been unable to find the words in Regulation T that prohibit you from buying and selling as much as you want as long as you have cash in the account to buy with. From what I hear, there are many online brokers who do not prohibit you from actively trading a cash account.

The question is:

Can one legally buy and sell at will in a cash account? Is the limitation imposed by some brokers a matter of their end of day accounting. Is the day coming when all the traders who have less than $25K will not only have no margin, they will be unable to buy and sell the same day?

Thanks in advance

Dan
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