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Strategies & Market Trends : DAYTRADING Fundamentals -- Ignore unavailable to you. Want to Upgrade?

To: Eric P who wrote (2594)	8/9/1999 6:28:00 PM
From: TraderAlan	Read Replies (1) \| Respond to of 18137

Eric, What would they do if they knew the losing % is much higher? Throw the brokers in jail? Alan

To: Eric P who wrote (2594)	8/9/1999 9:58:00 PM
From: -	Read Replies (1) \| Respond to of 18137

Thankfully these regulators are now dedicating their time and efforts to protect us from ourselves... My favorite: "It's unfortunate that it sometimes takes a tragedy, like what happened in Atlanta, to focus national attention on an issue or a problem," now there's some solid logic... and remember the final quote in this article "we shouldn't be gambling with money we can't afford to lose". Thanks, Hildreth we really needed to hear that from you, obviously you understand the profession very well! ========================== State Regulators Slam Day-Trading Firms Updated 8:54 PM ET August 9, 1999 WASHINGTON (Reuters) - State securities regulators Monday issued a damning report on the day-trading industry and called for stronger oversight of the services that allow customers to quickly trade stocks using sophisticated software. The study by the North American Securities Administrators Association (NASAA) said problems include misleading marketing, poor screening of customers, questionable loan schemes and widespread losses by day-traders. The results of the seven-month investigation come less than two weeks after an Atlanta man, apparently distraught over his day-trading losses, bludgeoned his wife and two children to death and shot dead nine people in two day-trading offices. "It's unfortunate that it sometimes takes a tragedy, like what happened in Atlanta, to focus national attention on an issue or a problem," New Hampshire securities regulator Peter Hildreth told a news conference. The Electronic Traders Association (ATA), an industry group representing many of the day trading firms, said it had taken steps back in February to promote risk disclosure and to reduce the "hype" surrounding day trading. "All day trading firms can and must strive to improve their disclosure mechanisms and their ethical practices," said ATA legal counsel Saul Cohen in a statement. Hildreth, president of NASAA, said day-trading firms would find themselves under increasing regulatory pressure unless reforms were made. "Firms have engaged in practices that would be clearly unacceptable if conducted by traditional brokerage firms," the report said. "Problems in the day-trading industry appear to be widespread." The report was careful to distinguish between day-trading at the 62 firms it believed were active and the millions of consumers who have online brokerage accounts. Day-traders attempt to make profits on small changes in stock prices, buying and selling many times a day using equipment at day-trading firms' offices or using their own computers equipped with the firms' sophisticated software. Some 4,000-5,000 individuals put in as many as 35 trades a day from their terminals at day-trading firms, according to the industry's own trade group. The NASAA report said its surveys showed most of those people were losing money. An additional 150,000 to 250,000 people, or 2 to 3 percent of all online investors, make about two trades a day from home, according to industry sources. The study commissioned an analysis of accounts at All-Tech Investment Group, incidentally one of the firms used by Mark Barton, the day-trader who went on the rampage in Atlanta before killing himself. Seventy percent of the 30 randomly chosen accounts from All-Tech's Massachusetts branch office lost money. "Only 11.5 percent of the sample evidenced the ability to conduct profitable short-term trading," said consultant Ronald Johnson of Palm Harbor, Fla. The states have played a leading role in highlighting the dangers of day trading, establishing a special task force last December and announcing enforcement actions in Massachusetts and Texas. Consumer warnings were also sounded early this year by Securities and Exchange Commission Chairman Arthur Levitt, and the National Association of Securities Dealers (NASD) board resolved on the day of the Barton shootings that customers must be warned of the risks of day-trading before opening accounts. NASAA said it had found instances in which day-trading firm branch managers had misrepresented customer income levels to qualify them for accounts. The report also expressed concern that some firms promote and arrange inter-customer loans to help losing traders meet margin calls. Some news reports have said Barton shot at fellow traders who had loaned him money. His losses have been estimated at close to half a million dollars. NASAA called on NASD to explicitly ban such lending to prevent customers from trading beyond their means. The report complained of extravagant earnings claims made by day-trading firms, although it said some of these claims had been removed from Internet sites maintained by the firms. A check of several Web addresses showed All-Tech had a notice regretting the shootings and posted risk warnings, as did On-line Investment Services. Momentum Securities, another firm used by Barton, had a notice posted saying: "Day-trading involves high risk." But TCI Corp. referred prominently to a "powerful high-profile income opportunity" and elsewhere to an "unlimited income opportunity." The NASAA report endorsed NASD's proposed rules on risk disclosure, urged the SEC to speedily approve the rules, and called for an enhanced regulatory focus on the industry. State regulators said consumers should know that day- trading is a form of gambling rather than investing. "You shouldn't be gambling with money you can't afford to lose," said Hildreth. ======================

To: Eric P who wrote (2594)	8/11/1999 6:59:00 AM
From: JB2	Read Replies (4) \| Respond to of 18137

"To understand what the SEC's war on daytrading is about you must understand that the greatest monopolist of information processing in the United States is not Microsoft, it is the SEC. Just as Microsoft, the SEC licenses the means of information flow, the difference between them being...that the SEC can impose more economic pain on those who threaten its monopoly. Daytrading, which relies strictly on what is in the market itself for information (rather than the order of the integrated disclosure system) and the Internet whose sources of information are democratic, anarchic and wonderfully subversive are metaphors for the freedom to identify as irrelevant the Commission's view of the information which should be available to market participants." This, by Saul Cohen, came from the link to Momentum Securities that is posted next to the Fox news article (noted in Eric P.'s post). There is a link, at the bottom of the Momentum home page, to Saul Cohen's articles titled "The Empire Strikes Back" parts 1 and 2. Cohen was featured on CNN's Moneyline program the other night, and allowed to give a brief rebuttal to the SEC's recent derogatory public comments directed towards daytraders. Unfortunately Cohen is generally not a plain spoken man (he's an attorney for the Electronic Trader's Association) and his writing and speaking style somewhat obscure his very important message: That there is an immense and concerted institutional effort to rein in daytraders rather than cater to, or capitulate to, them. And the SEC leans toward acting in the best interest of the institutions rather than the people of this country. They want "the people" to be happy with whatever returns the mutual fund industry can deliver to them, while reserving the larger profits for the institutions themselves who are shepherding the herd's money. Notice how Saul appropriately capitalizes the I in Internet? What has happened in just the last few years, thanks to the Internet, is the profit potential of the institution has been eroding thanks to the volatility provided by the new major players in the arena: the herds themselves. Technology has beefed up the herd and it is scaring the shepherds. Notice how reluctantly Goldman Sachs and ilk are to enter the fray of Internet-based information dissemination and trading? They obviously would rather fight than switch, as the old tobacco marketing slogan went. But faced with the mutiny of their customers, their choices are quickly narrowing. They can either lower their commissions and lose huge revenues, or keep them high, and still lose revenues. What else do they have up their sleeve (to use the gambling lingo they sooo love)...Ah yes, the arm of the SEC. So the SEC is using all the elbow grease they can to scrub the truth out of the real story behind daytrading, and to try and somehow wrest control back, away from the people's keyboards, and into the hamfists of the institutions again. Capitalizing on anything they can, from negative plugs in sensationalized "news" articles, to press releases released to coincide with workplace violence news stories, the institutions and SEC are battling in a concerted effort to use regulations to put daytraders out of business. But if what they say is true---why bother to use regulations? If what they say is true, won't daytraders all be out of business soon? No, because their disinformation campaign is false. The ranks of daytraders are growing, and only if the market is once again rigged to give advantage back to the institutions will the number of daytraders decline. Yeah, it makes the institution's job harder, and profit lower, because ECN's and the daytraders that use them serve democracy by reducing spreads. Just like the Internet makes it harder in general for multinational corporations to take advantage of people. The disinformation campaign is the main weapon available in countries with free speech laws, to combat the democracy provided by the web and ECN's. We will see more and more restrictions proposed by the beltway lobbyist puppets. A popular angle is "in the interest of the children", or in the case of middle class adults experimenting with daytrading, the angle is "to save them from hurting themselves with this new powerful technology". Watching the powers-that-used-to-be scramble to recapture control is comical, and I have relished reading the laughable parade of recent press missives on daytrading, but am sobered, recalling these words of Abraham Lincoln: "The money power preys upon the nation in times of peace, and conspires against it in times of adversity. It is more despotic than monarchy, more insolent than autocracy, more selfish than bureaucracy. It denounces, as public enemies, all who question its methods or throw light upon its crimes."