NEW DAYTRADING RULES COMING SOON
by: houston_sam1 09/24/03 05:20 pm
Msg: 52511 of 52556
Before you say, “I’m not a daytrader, so who cares?” read on.
Speaking with a broker at Etrade the other day about some bonds, I casually mentioned my IRA and that I frequently daytrade the account. He said, “Well, that’ll soon change. Won’t be able to do that anymore.” When asked exactly what he meant, he said that more daytrading rules/restrictions are coming down from NYSE and NASDAQ, probably by late October. Currently, you can trade funds in an IRA over and over – 100 times a week if you want – as they are immediately available to trade after a sale. With the new rules as proposed, those funds will be “unavailable” for three business days! For many, this will mean making at most 1-2 trades a week from an IRA, and that assumes that the right time to buy hasn’t slipped away while the funds were unavailable.
Margin accounts are facing additional restrictions, too. Make one (1) daytrade in an account with less than $25,000 in it, and you will only be allowed to sell for 90 days. No purchases allowed. I suggest you read that again. Anyone ever buy & sell the same day, even once? Do it with less than $25,000 in a margin account, and you’ll be screwed for 90 days. What if you buy a stock, fully expecting to hold it, but it starts tanking and you get out the same day? THAT’S A DAYTRADE. Same penalties.
This isn’t going to be good for the markets or millions of investors, many of whom have become much more active traders, and certainly not good for the brokers. Yet the real crime here is the underlying arrogance of those who wish to dictate what you can or cannot do with your own money, and set up completely arbitrary limits, such as their $25,000 minimum equity rule. It’s a paternalistic attitude at best, but criminal and self-serving at its worst.
finance.messages.yahoo.com
===========================================================SEC to tighten short-selling rules
By John Labate in New York
Published: September 25 2003 23:41 | Last Updated: September 25 2003 23:41
US securities regulators are moving ahead with sweeping rule changes governing stock "short-selling", a legal but sometimes controversial trading practice.
Annette Nazareth, head of the market regulation division at the US Securities and Exchange Commission, said Thursday that a formal set of rule changes would be presented for approval in the near future.
"We can expect the proposal for short-sale reform will be calendared for Commission consideration in the next few months," she said in an interview. Ms Nazareth's staff is preparing the proposals but they must still be approved by the SEC's five sitting commissioners. The Financial Times first reported in February that such reforms were being considered.
If adopted, the new rules would bring fundamental change to the way shares are traded across all US stock markets. Short-selling is a legal and often beneficial practice in which a trader borrows shares from another party and then sells them into the market, betting that the share price will go down when he must buy shares in the market at a later date to repay the original loan. If the price of shares does fall, the trader earns a profit.
The new SEC proposals will attempt to standardise short-sale rules across all stock markets in order to keep pace with recent decimal and technology changes.
One change will be to replace the "tick rule" at the New York Stock Exchange with a "bid test", in which a seller can only sell shares short at a price above the current price people are willing to buy the shares in the market. The SEC is also expected to launch a pilot programme in which such short-sale restrictions will not apply to a certain number of large, liquid stocks.
Some have complained to regulators in recent years that the practice and current set of rules can be abused. The new SEC rules are expected to include a provision meant to stamp out so-called "naked" short selling. Regulators now consider this to be a persistent problem, especially in the trading of small, thinly-traded company shares that trade in off-exchange markets.
A naked short occurs when shares that were never borrowed are sold illicitly in the market, resulting in steady downward pressure on a company's share price. The seller collects money for the sale but no shares are delivered, since, as critics point out, the current rules do not require delivery to be made. The new proposals will include a rule that requires the delivery of the shares by the settlement date, typically three days after the trade is made.
news.ft.com |
