Carl,
Also, the last time I asked IB about daytrading in a cash account (about 2 months ago), they said that it was fine, but that their policies could change in the future. Has anybody successfully daytraded in a cash account through IB?
I've had a longstanding interest in the issues of trading in a cash account. A couple of observations
1) The definition of daytrading, as stated by the Nasdaq and NYSE proposals is specific to margin accounts
(f)(8)(B) Day Trading
(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
purchase of the same security, or
b. a short security position held overnight and purchased the next day prior to any
new sale of the same security.
I have seen nothing in the new daytrading rules that has any impact on a cash account. There is no reason I can see why any cash account activity should have to be changed by new daytrading rules.
2) As far as I can tell, the only rules about activity in a cash account are those in Reg-T, which states very clearly that one can never use the proceeds of a sale of securities to cover the cost of purchasing those same securities and allows for a "settlement" period within which one must deliver sufficient cash to cover any purchase, or deliver any stock not held in the account that has been sold. I have never seen anything in Reg T that prohibits the instant crediting of cash to an account for the sale of a security, and I have never heard of any broker taking the position that credit cannot be given until the end of the settlement period. Several have imposed the rule that you cannot spend more in one day than the cumulative value of cash plus receipts from the sale of securities owned the previous night, but I believe that to be a holdover from end of day accounting, not an interpretation of clearing rules. It is certainly true that there are intricacies of the clearing process I know nothing about, but in all the times I have seen this issue discussed I have never seen anyone come up with a regulation that prohibits instant credit, and Reg T is very explicit in saying that if you have the cash you can make the purchase.
3) There are many brokers who have for many years given instant cash credit for securities sold by the account, allowing that cash to be used to buy more securities on the same day. It's hard to believe this practice has been going on for so long if it was illegal.
Dan |
