Cash-less trades confusion

Discussion in 'Trading' started by Scalpa, Sep 23, 2002.

  1. Scalpa


    Doesn't the NASD cash-less trading rule apply to only cash accounts? It seems like a plethera of online brokers are confused by this rule and are applying it to margin accounts.

    For example, Joe Blow opens a margin account with,, or, and funds the account with $25,000 or more. He then purchases non-marginable securities with all of his cash and sells it all the same day. When Joe goes to make another trade, he is told he can't trade anymore until the next day, even though he has a margin account.

    Does this make sense? I thought the rule only applied to cash accounts? According to the $7/hour customer service people at the online brokerages listed above, it also applies to margin accounts if you're trading non-marginable securities.

  2. birddog



    non marginable securities cannot be bought in a margin account so they buy it in the cash account (type 1).

    Since the security is in a cash account it is treated as a cash transaction.

    Note that even though your account is a "margin account" it is subdivided into cash (type 1) margin (type 2) and short (type 5).

    Your non marginable security goes into the cash portion - type 1

    Hope this helps