I think the truth must be that they have their own reasons for discouraging daytraders from holding overnight positions in stocks they trade very actively.
The reason is, quite simply, that there are essentially no avenues for exit (remotely orderly liquidiation) should major negatively received news hit a particular issue or, far more importantly, the broad market on a particular day between roughly 8pm EST and 6am EST, or, for practical purposes (of liquidity), between 4pm EST and the following 9:30am EST.
Once a broker dealer falls below its' minimum net capital requirement as designated by its' SRO (and depending upon the types of business it conducts, its' capital positions, debt-to-equity ratio, etc.), it has to immediately alert both the SEC and its' SRO (SEC Rule 17a-11), which can result in cessation of business activities.
Now, cases where this occurs are very, very rare, and those which do occur go largely unnoticed because the firms are required, at certain points "on the way down" (eating into their capital base) to file early warning notices with their SRO and the SEC, and they either fix the capital problems or go into receivership, at which time SIPC steps in and (an)other firm(s) step in. [Plus, not many people that I know look forward to the monthly SIPC report regarding trustees being appointed to insolvent broker-dealers and the like ;)]
But if, in an extreme case, every stock opened at 50% of its' closing price on the previous day, some firms could find themselves far under their minimum required net capital level and effectively 'out of business' at the opening bell.
That's my guess, but I'd also suspect that one might additionally find somewhat more liberal clearing practices (while not noncompliant) among larger, more well capitalized firms with extensive avenues of business (banking, capital markets, etc).
A larger "cushion" of capital, plus large and diverse streams of cash flow could allow some firms to be more generous in terms of their lending practices, though compliance restricts even the richest firms in their practices.
LPS5 |
