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

To: Apakhabar who wrote (10096)	9/3/2000 7:01:50 PM
From: LPS5	Read Replies (1) \| Respond to of 18137

Why don't the broker/dealers just designate certain stocks as being non-marginable, the way Schwab and Datek and probably others do? Many firms only designate stocks below a price level (which aren't typically daytraded) or experiencing extreme volatility as candidates for more stringent margin requirements. I believe that the concerns underscoring restrictive overnight policies has far more to do with the possibility for a sector or broad market decline than it does with a particular issue getting wacked south. And what is the purpose of lowering the buying-power AFTER the risk has been eliminated (the risky position has been liquidated)? I just got back from vacation, and am a little thicker than usual ;) so I don't really understand your question here, Ap. Could you rephrase it? [W]hy don't they simply create a rule for certain traders that they can trade 2x their account intraday that their account is a cash account after the market closes (no margin for overnights)? I guess my first reaction to this proposal - a good one, IMO, and actually practiced (in a way) in the leveraged world of hedge funds - would be that it helps to remember that clearing firms are desirous of limiting their risk while simultaneously allowing their two major streams of revenue to flourish and grow. First, fees earned from clearing transactions (which, of course, benefits from increasing trading volumes), and second, considerable interest revenue garnered from lending/custodial services (which, of course, respectively benefit from margin transactions and total assets under management). To balance these two opposing forces - limiting risk while increasing revenues - within the parameters of Federal Reserve, SEC, and SRO rules - is a trick that requires both traditional and proprietary practices which sometimes seem clumsy and pointless. While few would argue that many clearing firm rules aren't in fact clumsy policies, to be sure, they serve to protect the firms' various clients and correspondent firms from one another and allow the firms to grow their businesses without taking on what both the regulators and they (most importantly) determine as undue risk. LPS5