Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: eriksonc who wrote (13320)	7/8/2001 9:41:56 AM
From: TraderAlan	Respond to of 18137

Carl, Its funny how IB appears to be taking the conservative route (ie no daytrading) on under 25K and the liberal (ie max position size) on over 25K. Makes sense, business wise. From what I've read, they haven't started the new screening yet. When the rule was first passed, their comment was they would wait until the last minute to do so. We're about 80 days and counting. Once again, I don't see how a broker catering to short term trading can survive on the cumulative calculation. Take a 50K account at a typical real tick broker. At 200K (4x buying power) 4 1000 share roundtrips of a $50 stock hits the magic number, doesn't it? Alan

To: eriksonc who wrote (13320)	7/8/2001 11:10:22 AM
From: KymarFye	Read Replies (1) \| Respond to of 18137

"I was going to open an account at Tradestation, but they told me they use a cumulative daytrading buying power calculation (i.e., it is based on the total amount of money you've used in a day, not on the maximum position size for the day)." You should call again, and talk to a broker, and be sure you're both clear on what you're asking. I've been trading with them since last Monday, and the cumulative total of my trades have gone well over my total buying power (i.e., based on current 2x margin) - usually by early in the day. Perhaps they meant that at any one point, the cumulative value of all open positions taken together cannot exceed your margin. I suppose it's possible that they'll change policies in September... now you've got me ready to double check.

To: eriksonc who wrote (13320)	7/8/2001 3:00:59 PM
From: aldrums	Respond to of 18137

See post by Tailspin elitetrader.com

To: eriksonc who wrote (13320)	7/8/2001 4:40:03 PM
From: Dan Duchardt	Read Replies (3) \| Respond to of 18137

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