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

To: LPS5 who wrote (11176)	12/31/2000 4:04:14 PM
From: Apakhabar	Read Replies (1) \| Respond to of 18137

LPS5, The assertion that broker dealers might be categorized as "daytrading brokers" (vs. "investment brokers") is laughable. No. Well, there was no assertion, rather a suggested answer that ended with a humble question mark, and it was made by Mama Bear, not me. (#11148) Still, it's your right to laugh if that's what strikes your funny bone. The rest of your reply was interesting, but didn't clarify what we were talking about specifically, although you did express formally what others complained about: Clearing firms, on the other hand, may and do set different margin policies for particular types of accounts held with them via a particular correspondent. Yes, we're talking about firms setting different margin policies. Now let's discuss a real-life example of this that seems both discriminatory and irrational. It is based on the actual policies set by two firms I have accounts with. Say I have $50,000 cash in my direct-access account (Momentum) that is cleared by Southwest. Just before the close, I buy $100,000 worth of MSFT and I hold it overnight. In the morning, I sell the MSFT for $100,000 and my account once again has $50,000 cash in it. However, according the margin policy that Momentum and Southwest have agreed on, my buying power for the rest of the day is only $75,000. If I have the same amount of money in my Datek account, and I make the same trades, my buying power after selling the MSFT would once again be $100,000. The question is: Why are Southwest's margin policies stricter than Datek's? Margin policies are needed to protect firms from risk. But in this example there is no additional risk to warrant a reduction in buying power. One the MSFT position is liquidated and the account is 100% cash, why shouldn't the buying power be fully restored to 2:1? Because if it's legal for Datek to do it, should it not be legal for Momentum/Southwest to do it? This is NOT to say that it is REQUIRED for Momentum/Southwest to do so. If it is not legal for Momentum/Southwest to interpret the rules as Datek does, that begs the question of: why the discrimination? LPS5, I would very much appreciate your insight into this one narrow question: why do you think Momentum/Southwest sets a stricter margin policy than Datek? Or if it helps you to see both sides of the issue, why is Datek's policy more liberal than Momentum/Southwest's?