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

To: TraderAlan who wrote (13369)	7/11/2001 6:38:33 PM
From: TraderAlan	Respond to of 18137

The horses mouths are starting to speak. Received today from Brown and Co, where I still have $166: Important Notice Regarding Changes to Day Trading Margin Requirements Effective August 27, 2001, revised regulations of the New York Stock Exchange (NYSE) and the National Association of Securities Dealers (NASD) will require Brown & Company to impose new, more stringent margin requirements to accounts that are designated as “pattern day traders The major changes to the rules address: • Definition of a pattern day trader • $25,000 minimum equity requirement • Changes to day trade buying power calculations • Restricted day trading availability if a day trade margin call exists • Account restriction requirements for failure to meet a day trade margin call • Reduced time to meet a day trade margin call • Retention of deposits in accounts for two business day minimum Definition of a pattern day trader Under the revised rules, an account is considered to be a pattern day trader if it transacts 4 day trades in a 5 business day period. A day trade is described as the purchase and sale, or the short sale and repurchase, of the same security on the same day. Selling a position marked “vs. purchase” on a prior date will not exempt a transaction from the day trading designation. An exception is made if a long position held overnight is sold and then repurchased on the same day. However, a subsequent purchase and resale of any additional shares of this security would constitute a day trade, and be subject to the requirements. At Brown & Company, once an account is designated a pattern day trader, the designation will apply for a period of 90 days, extending beyond the date of the last day trade. $25,000 Minimum Equity Requirement for a Pattern Day Trader When your transactions require us to designate your account as a pattern day trader, you will be required to maintain a minimum equity of $25,000.00, even when your day trading transactions are for less than that amount. This equity is required to be on deposit in your account at the time your orders are placed If you are unable or unwilling to meet this requirement within five business days, your account must be restricted to “cash on hand” trading for 90 days. Remember, however, that Brown & Company also requires your margin deposits up front, and we may restrict your account even though the deposit is subsequently received. This may result in the lOSS of web trading access for your account, requiring you to trade through a telephone representative at the higher broker-assisted rates. Changes to Day trading Buying Power Calculations Under the new regulations, accounts that are not restricted and do not have an outstanding day trade margin call, may execute daytrades of marginable securities up to 4 times the “maintenance surplus” equity in the account at the start of the day. The requirement will be applied to the highest open daytrade position. At this time, additional intra-day sales in non daytrade securities will not increase daytrade buying power. The day trade buying power is set at the close of the prior business day. “Maintenance Surplus” is the amount by which the equity in your account exceeds the Brown & Company maintenance margin requirements for the account. Although it is often the same amount as the “Free Cash” displayed for your account, in certain instances it may be higher. If you are uncertain as to the availability of day trading buying power, check with customer service at 800-822-2021. Buying Power for an Account with an Outstanding Day Trade Margin Call If an account has an outstanding day trade margin call, or has been restricted for failure to meet a day trade margin call, more stringent rules apply. If an account exceeds its day trading buying power and creates a day trading call, the call must be met by a deposit of funds within 5 business days. Until the day trade call is met during this 5 day period, day trade buying power for marginable stocks is limited to twice maintenance excess, and the requirement is applied to the aggregate of all day trades for that day, not the highest open day trade calculation. This adjustment could cause a substantial increase in margin requirements where multiple day trades are executed. Buying Power for Accounts with Day Trade Restrictions After the fifth business day, if the call has not been met, the account is placed on day trading restriction. Buying power is further reduced to cash available for 90 days. Reduction in Time to Meet a Day Trade Margin Call The rule change reduces the time in which a day trade margin call must be satisfied from seven business days to five business days. Notwithstanding this exchange rule, Brown & Company requires that your margin deposit be available at the time your order is placed, and your account will be in violation of this rule should a margin call result from your trading activity. Brown & Company policy will require immediate payment. Retention of Day Trade Margin Call Deposit If an account generates a day trade margin call and subsequently makes a cash deposit to meet the call, the funds may not be withdrawn until a minimum of 2 business days after the date of the deposit. This would apply to wired funds or cleared funds transferred from another account. Of course, if paid by check, an extended period would apply to ensure that the check has cleared before reimbursement can be made.