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Strategies & Market Trends : The Final Frontier - Online Remote Trading -- Ignore unavailable to you. Want to Upgrade?

To: Jon Tara who wrote (10835)	6/12/2003 4:58:53 PM
From: Dan Duchardt	Respond to of 12617

"Cause after all now they even change the ability to use the funds from trading profits until the funds clear." As far as I know, margin accounts have not been subject to this restriction, but it is being imposed on cash accounts, supposedly at the direction of the NASD. NASD has apparently chosen to disregard the few opinions rendered by the Feds about their own (the Fed's) rules (Reg T) regarding use of proceeds in unrestricted cash accounts, which have consistently presented the view that it is ok. The logic for NASD's opinion totally escapes me, and the unbalanced treatment of cash accounts vs margin accounts is the best argument I know of for why the restriction on cash accounts is improper. There is no distinction between stocks purchased in cash and margin accounts in the clearing process. Either you own a stock or you don't, and if you sell a stock the proceeds are either available for use or not, regardless of what kind of account they are held in. Margin does not release anyone from the obligation to put up the portion of the cost of a stock that may not be borrowed from the broker, period. The logical extension of the argument against use of unsettled funds in a cash account is that margin accounts should be under the same clearing restrictions. It follows that all activities permitting spending more money than one has in an account at the beginning of the day without requiring sufficient "new" cash (the client must provide a portion of the cash, even in a margin account) to cover the purchases made within the settlement time are "illegal"; that includes most daytrading activity. The way I understand what some brokers who have been affected by this are saying, NASD apparently thinks they have the right to adapt the daytrading rule limitations on margin accounts under $25K to limit all sequential trading in cash accounts too; never mind that the daytrading rules that were submitted to the SEC for public comment and approval explicitly define daytrading as an activity in a MARGIN account.