Datek is offering all margin accounts 4-1

Discussion in 'Retail Brokers' started by GaretJax, Aug 29, 2001.

  1. GaretJax



    I just got an email from Datek on how they are handling the new rules. They are offering all margin accounts 4-1. I stil haven't opened an ib account. This makes the choice a little harder. Below is the email contents:


    On September 28, 2001, new NASD/NYSE day trading margin requirements
    will go into effect for all brokers. The new industry-wide day trading
    rules outline specific requirements that all accounts that frequently
    day trade must comply with.

    While the new day trading rules offer increased leverage, they also
    present the opportunity for greater losses. We ask that you take
    the time to understand how the new day trading rules will affect
    your account.

    My account hasn't been tagged as a pattern day trader account. What
    does this have to do with me?
    Datek is giving all margin accounts access to the additional day
    trading buying power as permitted by the new rule. Unless your
    account's trading pattern matches that of the NASD/NYSE day trading
    margin rule, you will not be required to meet day trading margin
    restrictions. However, we still ask that all margin account holders be
    educated on the new rules as they may affect your account. Should your
    account be tagged as a pattern day trading account in the future,
    Datek will notify you of the designation.

    What are the new day trading margin requirements for pattern
    day traders?
    A "pattern day trader" is defined as an account that makes 4
    round-trip day trades (buying and selling the same security in one
    day) in any rolling 5 business day period. Pattern day traders will be
    subject to a new set of day trading rules and requirements. Here's
    what you need to know:

    · Under the new rules, customers that have been identified as
    pattern day traders must maintain $25,000 in marginable equity at
    all times. Pattern day trader accounts that fall below the $25,000
    NASD/NYSE minimum will be restricted to cash transactions only,
    until the minimum equity amount is reached. Go to to find out how to
    transfer equity or
    for information on depositing cash and securities to meet the new
    $25,000 minimum.

    · A day trading margin call will be generated as soon as an executed
    day trade in a pattern day trader account exceeds the day trading
    buying power. Customers will have 5 business days to fulfill a day
    trading margin call. Only a deposit of cash or fully paid securities
    can satisfy a day trading margin call.

    · A day trading call must be met in 5 business days. If the day
    trade margin call is not satisfied by the fifth business day, the new
    NASD/NYSE rules require that the account be restricted to trading on a
    cash available basis for 90 days or until the day trade call is met.

    How am I given increased leverage under the new rules?
    The new rules modify the day trading buying power calculations,
    giving you access to 4 times the margin maintenance excess. This
    is a two-fold increase in the possible leverage available under
    current rules.

    Example: A pattern day trader with a cash balance of $30,000 and no
    positions in their account would have access to $120,000 day trading
    buying power ($120,000 = (4*30,000)).

    Day trading buying power is calculated based on the positions and cash
    in an account at the end of the trading day. Generally, you can
    calculate your day trading buying power using the following formula:

    [75% of the Long Stock Value (LSV) - 130% of any Short Stock Value
    (SSV) + Cash]*41

    As an added benefit, we will display your day trading buying power in
    real-time on your portfolio and trading pages as soon as the new rules
    go into effect. This buying power figure is the amount available for
    day trading. Day trading buying power does not change based on gains
    and losses in your account that occur intra-day.

    Be aware that all margin accounts will have access to the greater of
    either their stock buying power or their day trading buying power. Our
    systems will always allow an order to go through based on the higher
    buying power amount. Since our systems have no way of determining
    whether you will hold the position overnight or just for the day, it's
    your responsibility to enter trades that remain within the buying
    power for the type of trade you're making.

    What can I do to meet a day trading margin call?
    Should you need to meet a day trading margin call, the fastest way is
    by wiring funds to your account or sending an overnight check. For
    help with mailing addresses and wire instructions, go to Remember, day trading
    calls can only be met by depositing cash or non-margined securities.

    Is this industry-wide? Will all brokers have to comply with
    these rules?
    The new day trading rules are NASD/NYSE requirements that will have to
    be followed by all brokers. We are ready for these changes and are
    taking all the right steps to make sure you are ready as well. If your
    account is tagged as a pattern day trading account according to the
    new NASD/NYSE definition, you will receive notification from Datek. If
    your account has already been tagged as a pattern day trader under the
    current rule, the tag will remain in place for 90-days after your last
    day-trade and you will be required to be in compliance with the new
    rule as of September 28, 2001.

    Fully understanding your risk tolerance and the new NASD/NYSE margin
    requirements allows you to better manage your margin account. Please
    review our Helpdesk at for more
    information on the new day trading rules. If you have questions about
    the NASD's new margin requirement or need assistance with your
    account, please email our customer support staff 24 hours a day, 7
    days a week at, or call 1-877-94-DATEK
    (1-877-943-2835) from 8 AM to midnight ET on weekdays, and from 9 AM
    to 7 PM ET on weekends.


    Datek Online Financial Services LLC
  2. Datek's definition of a day trading account is interesting. The following is from their @nswerBox question regarding day trading margin requirements:

    "Day trading margin requirements
    A day trade occurs when you buy and sell the same stock during the same trading day. If you day trade three times in any one day or three times in any twelve-month period your account will be characterized as a day trading account."

    So, if I swing trade but my protective stop is hit on the same day I enter the trade and this happens three times within a one year period I'm a day trader ?

    I hope this is an error.
  3. LionSec


    Interesting question...

    If more then 6% of your positions get stopped out same day you opened the position, you are a pattern day trader based on the new rules.
  4. we all type in this box, however, what most of us do is keep typing instead of forcing a hard carriage return, we let it loop-back for us, this way, excellent comments like yours, which started this thread, don't cost so many scroll lines, and we can read significant content without unnecessary paging.

    given that these threads are heavy on the verbage, such a nice politeness counts volumes.

    I'm going to check out Datek, on your advise.