Can I sue the NASD over the new margin rule?

Discussion in 'Retail Brokers' started by Vinnie, Sep 8, 2001.

  1. fast


    I agree that more regulation is a possibility. One major question for me is whether ALL NON-PROFESSIONALS will be impacted -- not just those with less than $25,000. That is, "little guy" may not be defined by size of trading account, but by professional vs. non-professional status of the trader.

    Why do I think regulations could move in this direction? First, on another thread, I posted a link to an article that indicates a recent position paper concluded unsophisticated investors harm market efficiency. Don't know who published the paper, but it seems to have enough clout to get the attention of Federal Reserve Vice Chair Roger Ferguson. People who value market efficiency, and seek to protect it, may want to limit the market participation of unsophisticated investors.

    Here is the link to that article.}&siteid=mktw

    Second, the argument can be made that professional vs. non-professional is a less capricious and arbitary criterion for defining "unsophisticated investor" and for barring participation in the market than is account size. Put these (belief that unsophisticated investors harm market efficiency, value of market efficiency, and less arbitary criterion for barring unsophisticated investors) together and you have the possibility of defining "little guy" as all non-professionals.

    I would rather just trade than deal with all of this-- much, much rather. But, my account is less than $25,000, so I appreciate the power of federal regulations. I was not aware changes were being made that would have such a profound impact on me. Not complaining; I take full responsibility for my unawareness and my inaction. But now I am watching developments more closely because I intend to do all I can to prevent additional laws and regulations that restrict participation in the market.


    BTW, I posted another recent article that reports the GAO thinks "investors need warning on online trading risks" and that some Congress members are urging the SEC to take additional actions to protect consumers. I think most of the suggested actions or regulations sound good, but it is possible actions that negatively impact traders will emerge within this movement. Unfortunately the article has expired so I cannot provide a link.
    #11     Sep 9, 2001
  2. Babak


    coming from a concept of the world and markets deeply rooted in Austrian economics, I absolutely despise these new rules.

    The restaurant business has a much higher rate of failure (90%) than what the SEC claimed for day trading (70%) in a hastily done research report. Why doesn't the government hurl itself infront of people who are about to start a restaurant and protect them?
    #12     Sep 9, 2001
  3. Vinnie


    I agree it was and is our responsibility to be fully aware that this rule was brought up almost a year ago, but I have been a member of a highly respect trading room for almost 6 months and it was not until less than 2months ago, that someone started chatting about it. Not until i started researching the ramifications of the new rule did i find out the real truth, and Friday's email from IB was the icing on the cake. Now, i will not even be able to trade cash, i have to wait 3 days after i use it up, unreal. Anyway, back to the rule, when i started digging into the rule a little further 2 months back, i started calling my broker, Cybertrader first, then MBT, then Preferred, etc. I got different answers from all of them, they all were sand bagging us, because they wanted to stall us, and not panic anyone. Well, they didn't fight hard enough for us, because a lot of accounts are going to get closed. No one was making a big deal about it, and i have heard from several traders who were either misinformed from their brokers that nothing would change, or they misunderstood what to ask the broker. Quite frankly i think the brokers knew all along, they just didn't want to tell us.

    Also, i think a lot of traders got taken by surprise from a minimum of 2-5k for a margin account all the way to 25k is a very drastic and large step.

    Oh, and what kind of cracks me up about this whole thing is lets say i have 24k in my account and I buy 24k worth of CSCO for example, and I sell it later that today or even the next day. I have to wait 3 days before i can use my own cash, not margin at all, in order to open a new position. This is what it will be like at IB, i'm sure it does depend on the broker, but i like IB, want to stick with it. Anyway, been rambling on enough on this subject, and i still wish i could do something about it.
    #13     Sep 9, 2001
  4. huby


    Lol... about the letter to Pres. Bush. That was funny.

    In all seriousness though, someone ought to at least start a mass petition email to show our disgust of this new rule. One website I know of that does this sort of thing is I bet we could create a pretty BIG list of supporters for our cause. Especially through the power of the internet.

    Heck, there are over 8,000 members here alone. That would be a great start. I think for the most part, even the bigger traders don't like this new rule because of 1) volume implications, and 2) Just for the fact that the SEC got away with it. (what will the next rule be?).

    If anyone starts one be sure to post it here. I may look into it myself, but I'm very busy this month.
    #14     Sep 9, 2001
  5. NKNY


    I know that your right to trade stocks isn't currently protected by law but they are public Markets and I for one view this regulation as financial discrimination.

    Maybe it's time to re-write the laws...

    #15     Sep 10, 2001
  6. Atlantic


    i guess the ultimate logical step would be:

    simply forbid daytrading for every private trader.

    advantages for the "big boys" (nasd members, market makers): wider spreads, less interference

    disadvantage: less volume

    what i would like to know: when did it start to become possible for private traders to daytrade? what were the reasons? new regulations, or simply the technical progress?
    #16     Sep 10, 2001