Day Trading Margin Rules from IB

Discussion in 'Trading' started by tc, Aug 15, 2001.

  1. tc


    Day Trading Margin Rules

    Starting August 28th, the NYSE will impose a $25,000 minimum equity requirement for "pattern day traders." Effective September 28, the NASD will impose the same requirement.
    The new rules define a pattern day trader as someone who has made four or more day trades within five business days in his or her account, provided that the number of day trades was more than 6% of the total trades in the account during the period.

    Consistent with the new margin rules, as of August 28th, if an IB customer's margin account falls under $25,000 and the customer has opened and closed positions on the same day three times within five days, the customer will not be allowed to open new positions until the $25,000 requirement is restored, or the five days have elapsed.

    Although the NYSE and NASD rules impose other "pattern day trader" account restrictions, our customers will not be affected by these restrictions because we believe our current margining system complies with these additional rules.

  2. Htrader

    Htrader Guest

    These Ib rules seem very lenient actually. I was under the impression that if you made more than three day trades in 5 days, then your account would be frozen. But these rules sound like you would simply have to wait a couple days before you can start trading again (albeit with the same limits.)

  3. roger2



    Where did you get your information?

    Will IB impose the new rule starting Aug 28 for those who only trade Nasdaq?
  4. trinfo


    If you make more than 3 daytrades in 5 days, your account gets frozen. IB is preventing you from more than 3 daytrades in 5 days by limiting to you a maximum of 3. :)

    Best solution yet...
  5. def

    def Interactive Brokers

    The rules pasted above are posted on the web site.

    Forget the original response from the ibmgt. This is the current state of interpretation:
    if an IB customer’s margin account falls under $25,000 and the customer has opened and closed positions on the same day three times within five days, the customer will not be allowed to open new positions until the $25,000 requirement is restored or the five days have elapsed.
  6. ktm


    The new rules do seem lenient given the significant discussion that has taken place here and the NASDR rules as handed down. I like IB's additional statement about "additional rules not being necessary for our customers". That was a nice touch.

    It was I have to ask the smartass question...Can we have multiple accounts at IB? You know where I'm going with this. If I can have 3 accounts with 4K each, I can trade my butt off and get them each frozen for 5 days at a time in cycles. What about it?

    Did I read this wrong? Would they freeze me after 3 daytrades in one day? or would they wait three days and see that I had 29 daytrades, then freeze it?

    I am not trying to be anal here, but I would like to find a reliable way around it for our sub 25K guys.

  7. roger2



    IMHO, if you find a way around it, consider yourself lucky and keep it to yourself.

    If there were to be a loophole in IB's implementation of the new rule, discussing it on this (or any) board would surely lead to steps taken to close it.

    Likewise, def has been truly helpful to us IB traders and we are lucky to have this type of interaction with a company rep. But considering that he does represent his company on this board (i.e. the public), it would not be in his or his company's best interest to advise on how to circumvent SEC rules, ya think?

    I am as disappointed as any IB trader about the new rules. I am trading a 10K account and , after about 16 months in this game, I have just turned the corner and am able to make consistent profits (last 5 weeks all 3-10% positive). Without IB's great commissions and executions I would not be doing so well.

    So I am being knocked out just as I am 'getting into my groove'. And it is unfair to me and you and the others <25K. I just don't think it is fair to expect def to advise us on how to break the rules.

  8. ktm


    While I appreciate your comments and don't want to put him or IB in a tough spot, I would like to know if one can have multiple accounts. I didn't read comments from any brokerage that supported this new rule and I would be willing to believe that most brokerages would turn their heads if they could. I just started a small account with IB to see if it was worthy of the positive comments here...I also enjoy def's participation. I don't necessarily want to put 25K over there just yet but I will if I have to.

    I got stopped out on one position yesterday and accidentally entered a limit order instead of a stop on another and sold immediately...2 day trades yesterday. Under the new rules, I'm frozen for 5 days if I do one more before next Weds.

    My bigger problem here is with "the man" putting regs on my trading. If I can meet IB halfway on this, I'd like to do that.
  9. roger2



    I am not necessarily trying to protect def or IB, they don't need that and i would be surprised if def or IB advised on how to 'get around' the rules.

    I agree, the brokers would all 'turn their heads' if they could...but they can't. But, hypothetically, if you or anyone finds a flaw in IB's implementation of the rule and discusses it here, IB would be compelled to fix it.

    Hypothetically, if someone publicly (on a board) exposes a flaw in the implementation, then everyone would take advantage briefly, until it was promptly fixed. Then it would be lost...

    good luck
  10. def

    def Interactive Brokers

    you are correct in that if someone posted an item questioning whether or not IB was doing something that may circumvent any rules/regulations, I would be negligent not to bring it to the attention of our compliance department.

    IB is typically very cautious when it interprets rules as the firm takes the regulations very seriously. The legal and compliance team most certainly studied the new rules in detail and decided to implement an appropriate interpretation. I'd be surprised if there is a loop hole to be exploited.

    #10     Aug 16, 2001