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Strategies & Market Trends : Margin Calls - Share The Pain
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To: daffodil who started this subject1/3/2001 7:47:03 AM
From: daffodil  Read Replies (1) of 158
 
Daytrading margin

I've been asked to chime in on some of the margin questions recently under discussion on the "Daytrading Fundamentals" thread, so I'm reviewing the posts over there and will reprint everything about daytrading margin here.

Some brokerage firms are now classified as day-trading firms for the purpose of the new suitability rule:

nasdr.com

However, for margin purposes, there are no different regulatory requirements on one firm versus another. Of course, some of the new (and proposed) restrictions on the way that funds may be lent to customers outside of the margin account may affect day-trading firms more than wirehouses, but that is another matter.

A little bit of history on that: before approximately 2 years ago (I can look up the date if anyone cares), Regulation T prohibited broker/dealers from loaning money to customers in any way other than that set forth in Reg T.

When that rule was revoked, the day-trading firms picked up on it and began using inter-customer loans, and even loans from principals of the firms to the customers. Those practices have been the subject of some regulatory concern, and are subject to further rulemaking, but the basic principle still stands that "creative" loans may be made to customers, provided certain rules are followed.

If anyone's interested in more information on this (a few cases have come down), holler and I'll look them up and post the cites.

Tonight I'm going to catch up on the posts and prepare some daytrading margin calculation examples.
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