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Non-Tech : Datek Brokerage $9.95 a trade -- Ignore unavailable to you. Want to Upgrade?

To: Jon Normile who wrote (7490)	3/23/1998 8:27:00 PM
From: Spots	Read Replies (1) \| Respond to of 16892

So, to net it out, you hit us twice. Clothe it any way you want; that's the bottom line. By no means do all brokers do it this way, and Datek didn't do it this way either in the past, when I opened my accounts. It all sounds good if you flunked accounting 101, but give us credit for being able to tell the left and right sides of the ledgers apart. This gives a whole new meaning to the term "Double Entry Bookkeeping."

To: Jon Normile who wrote (7490)	3/24/1998 12:54:00 AM
From: dumbmoney	Read Replies (1) \| Respond to of 16892

Thanks for the response. << I hope this explanation clarifies our procedures and answers everyone's question. >> Actually it raises some new ones... << Second, the customer has to devote money as collateral on the original stock loan. When the money is collateralized, it is not available to receive interest. To reflect this, the proceeds of the sale are deducted from the real cash value again. >> Why do you deduct 100% when only 50% is required for margin? << A customer has the a portfolio with the following equity: Real Cash = $10,000 Available Cash = $10,000 Buying Power = $20,000 Long Stock Value = $0 Short Stock Value = $0 >> In your example the customer doesn't have any marginable stock for use as collatoral. This is not the typical case. Could you please re-run the example assuming he has $20,000 in marginable stock. Thanks again.

To: Jon Normile who wrote (7490)	3/24/1998 8:36:00 AM
From: doniam	Respond to of 16892

Thanks for your very clear reply. I've been around this business for quite a while and your procedure is the norm. Sometimes you can get interest on the proceeds from shorts, but this is usually only if you are a very valuable customer or the B/D is making it up somewhere else, perhaps in the commission charge. Suggest that the interest complainers check elsewhere and I doubt that they can do better than DATEK Now, any idea when or if we can have stops on listed stocks? -Don

To: Jon Normile who wrote (7490)	3/24/1998 3:01:00 PM
From: peter michaelson	Read Replies (2) \| Respond to of 16892

This response from Schwab in under 12 hours! In sum, Schwab charges a higher margin rate, but on a lower balance. I invite Mr. Normile and others to compare and contrast. Email from Schwab: Now let us go to your example: > >Beginning Credit Balance: $10,000 >Security Market Value: $0 > >After shorting $20,000 of stock, we arrive at: > >Beginning Credit Margin Balance: $10,000 >+ Short Sale Proceeds: $20,000 > ------------- >New Credit Margin Balance: $30,000 > >Short Market Value: -$20,000 > ------------- >Account Equity: $10,000 > >As mentioned previously, subtract the Short Account value from the Margin Balance to determine if you are earning or paying interest. > >New Credit Margin Balance: $30,000 >- Short Market Value: -$20,000 > ------------- > $10,000 > >Therefore, interest would be earned on $10,000 at a rate of 4% in this example. > >At this time, the interest rates that Schwab charges on outstanding margin debit balances are as follows: > >For balances of: The applicable margin interest rate is: > >$0.00 - $9,999.99 9.25% >$10,000 - $24,999.99 8.75% >$25,000 - $49,999.99 8.25% >$50,000 and above 7.75% > >We hope that this response has adequately addressed your concerns. Enjoy your day. > >If you have any further questions or concerns, please do not hesitate to contact us. Thank you for using Schwab's Electronic Brokerage Services. > >Sincerely, > >Nicole Criscione >Schwab Electronic Brokerage Services

To: Jon Normile who wrote (7490)	3/24/1998 4:24:00 PM
From: RealMuLan	Read Replies (1) \| Respond to of 16892

Dear Mr. Normile: in your example, you mentioned that "This customer would be paying %7 APR on $10,000 for each day that he held this short." But you haven't mentioned about those $10,000 real cash in your example. Does it deserves 4% interest? As far as I understand, Datek should pay 4% interest on that $10,000 real cash. Please correct me if I am wrong.

To: Jon Normile who wrote (7490)	3/24/1998 7:46:00 PM
From: Ira Player	Read Replies (1) \| Respond to of 16892

What a complete load of bullsht! "When a customer sells shorts, Datek Online borrows the stock from wherever it is available. We then loan it to the customer so that they can deliver it to whomever they sold it. The customer receives cash for his sale and this amount is added to their real cash value. However, even though the customer gets cash for a short sale, there is still a cost to pay. First, since the customer sold something that they don't own (the definition of short selling) they are not entitled to the proceeds." I believe this to be correct. Note that the same value that was borrowed has been 'returned'* to the lender. Stock with a value of $20000 was borrowed and proceeds of $20000 were given. No loan has taken place. The only thing remaining on loan is the potential value of the stock. "For interest calculation purposes, that money is deducted from their real cash." The proceeds from the stock sale reimbursed the lender 100% of the present value of the stock. "Second, the customer has to devote money as collateral on the original stock loan. When the money is collateralized, it is not available to receive interest. Since when? The 50% margin requirement is IN CASE the stock moves against you. Your method of not paying interest on the cash used as collateral treats it as already lost! To reflect this, the proceeds of the sale are deducted from the real cash value again. This gives us an adjusted real cash amount which we use for interest calculation purposes." Rubbish! Margin requirements are 50%. This method forces the short seller to put up 100% of the stock value. 50% provided by their equity and 50% 'borrowed' from you. Your voodoo accounting, in the example provided, allows you to borrow stock worth $20000 from one of your account holders, without compensation, retain the proceeds when it is sold (Datek now +$20000), take control and benefit of the short sellers cash (Datek now +30000) and force the seller to pay interest on a phantom $10000 that hasn't really been loaned. On top of this: Also, This short stock value is marked to market so as the stock goes down in price, less money will be deducted from the real cash and the customer will pay less interest. What is not stated of course, is that if the stock moves UP more phantom, potential loss money must be loaned by Datek and interest charged. So Datek has interest coming in on $10000 from the short seller and has $30000 to loan to other margin users, with no capital employed. Not a bad deal. For Datek. The $10000 used as collateral should still gain interest for the account holder. The amount should be reduced as the stock is marked to market each night. The money must be there to meet margin requirements. That does not take away its value. It only makes it unavailable for other uses. Your accounting methods borderline on larceny. Ira

To: Jon Normile who wrote (7490)	3/25/1998 12:36:00 AM
From: Jon Tara	Read Replies (1) \| Respond to of 16892

Thank you for your explanation, Jon. This does not correspond, however, with the disclosure statement that I was provided when I opened my account. I am now a bit embarrased to have defended Datek by quoting from a disclosure statement that is apparently now out of date. Can you tell us when the policy was modified, and when notifications of the policy change were mailed-out? Thanks.

To: Jon Normile who wrote (7490)	3/25/1998 1:40:00 PM
From: peter michaelson	Respond to of 16892

Jon: Would you care to re-visit the interest calculation when short positions are in the account for us? I'm not able to reconcile interest on the Datek statements with what you have written on this thread. thank you and best regards peter michaelson

To: Jon Normile who wrote (7490)	3/26/1998 11:19:00 AM
From: WallStBum	Read Replies (1) \| Respond to of 16892

Jon - Sorry if you've been asked before, but does Datek have any plans to trade BB stocks? I love Datek for regular OTC and listed but have to go through my E*Trade account for BB which I don't like anywhere near as much as Datek. Thanks in advance. Dax

To: Jon Normile who wrote (7490)	3/29/1998 12:03:00 PM
From: eWhartHog	Respond to of 16892

A customer has the a portfolio with the following equity: Real Cash = $10,000 Available Cash = $10,000 Buying Power = $20,000 Long Stock Value = $0 Short Stock Value = $0 After the customer shorts $20,000 his portfolio looks like this: Real Cash = $30,000 Available Cash = $0 Buying Power = $0 Long Stock Value = $0 Short Stock Value = -$20,000 Adjusted Real Cash = -10,000 However for interest purposes, his adjusted real cash is -$10,000. This is because we deduct two times the value of the short position from the real cash amount. $30,000 less $20,000 less $20,000 equals negative $10,000. This customer would be paying %7 APR on $10,000 for each day that he held this short. Also, This short stock value is marked to market so as the stock goes down in price, less money will be deducted from the real cash and the customer will pay less interest. ______ I have reviewed your above example of interest calculations on short positions and cannot agree that this method accords with either standard industry practice or your own disclosure statement. In this example the customer pays interest on $10,000, even though at other brokers he would earn interest on at least $10,000. Now consider a decline in the stock value to $1,000, when the mark to market increases adjusted real cash on a dollar-for-dollar basis to $9,000: Real cash = $30,000 Short stock value = -$1,000 Adjusted real cash = $9,000 The customer earns interest on $9,000, even though standard practice is to earn interest on at least $29,000. And the short position is only $1,000! If however, you say adjusted real cash is increased $2 for every $1 decline in the stock price (a novel method of marking to market), I would fear that adjusted real cash would be reduced $2 for every $1 increase in the stock value. Under this method, if the stock value rose to $22,000: Real cash = $30,000 Short stock value = -$22,000 Adjusted real cash = -$14,000 The customer pays interest on $14,000, even though standard practice would see him receive interest on $8,000. Every $1 increase in stock value increases the "loan" size by $2. In other words, the customer is overcharged at Datek, and the overcharge increases when the stock price rises! I think everyone will be better served if Datek conforms to its disclosure statement and standard industry practice.