Resolution of the conundrum... maybe
I met a couple of people at the Expo in NY and had a chance to discuss this old margin call issue. One was a rep from Penson Financial Services, Inc., a clearing firm, who agreed with me in principal that the Nasdaq example about having to cover a daytrading loss when you started the day with a Reg T excess greater than that loss was incorrect. However, that was in response to my statement of the problem, not a reading of the document. And then I met a fellow who just happened be carrying a marked up copy of
investor.nasd.com
Something about his markings led me to read the document in a new light, and that possibly clears up the issue
Regulation T margin is calculated at the end of the business day. All transactions on the same day are combined to determine the Regulation T requirement. Therefore, Regulation T does not distinguish between day-trading and other forms of trading (see Regulation T, Section 4(c)(1)).
A Regulation T margin requirement may be satisfied by a transfer from the Special Memorandum Account (SMA), or by a deposit of cash, margin securities, or exempted securities, in any combination (see Regulation T, Section 4(c)(2)).
Because of the phrase Regulation T call for $20,000 I had always interpreted the paragraph
The above answer presumes Customer C did not incur a loss on the day-trades (i.e., made a profit or broke even). If Customer C were to buy $300,000 of securities and sell them the same day for $280,000, he would have a Regulation T call for $20,000, or 100 percent of the loss. Regulation T requires additional margin when a transaction creates or increases a margin deficiency in an amount equal to the deficiency created or increased (see Regulation T, Section 220.4(c)(1)).
to mean that if money was lost, that much money ($20,000 in this case) would have to be sent to the broker. Now I don't think so. It is just saying that additional margin is required by Reg T (that was never an issue for me). The fact that there was already margin excess in the account ($50,000 in the example, contained in this hypothetical entity the SMA??) sufficient to cover the increased margin requirement means I don't have to send more money, but that does not negate the additional margin requirement. I still think the "call" phrase is inappropriate, but if it doesn't mean you have to send money, my problem is resolved.
Dan |
