Hello! I need to bring some light on stock brokers and the amount of their margin loans. I know that US stock brokers provide a 50% (2:1) default margin loan for accounts with a minimum balance of $2,000. However, some stock brokers outside the US (for example Tradezero or Alarictrader) can offer the leverage from 6:1 to 40:1. How is it possible? I thought they also had to stick to regulation T. Or am I wrong? Besides, I have read that proprietary traders can also trade with a similar leverage. I know they have to pass the exams. However, what rules or regulations apply to them? Thank you very much for the explanation.
The discalaimers and T&C pretty much describe how they can do it: TradeZero is registered with the Securities Commission of the Bahamas. Disclaimer: Please be advised that TradeZero DOES NOT accept accounts from the United States, Bahamian Citizens or persons domiciled in those jurisdictions. All levered accounts cannot hold more than 2 to 1 leverage going into the 4 PM EST close. TradeZero reserves the right, at its discretion, to sell or cover any account that has exceeded this threshold, by 4PM EST
Thank you for your quick response. So, if I understand right, Tradezero account are governed by regulation T only for overnight margins. However, what about intraday margins? I thought I couldn't get more than 2:1 leverage for standard margin account (under $25 000) and 4:1 leverage for PDT margin account (over $25 000). Or are these conditions only applicable to US citizens? TradeZero offer 6:1 for non US and Bahamian citizens. In addition, Alarictrader offers up to 30:1 Intraday & 6:1 Overnight for Reg T margin accounts. It doesn't make sense to me how you can hold stocks with 6:1 overnight margin without breaking the regulation. I'm sorry if I ask stupid questions. I just want to be clear about this. I should also add that I'm an EU resident. Just for completeness.
Seems they are making up their own definitions of what Reg T is? Makes clients feel the accounts are properly regulated by calling them Reg T. But they are not.
@Deenius apologies for the delayed response. Alaric is NOT subject to FINRA as it is not a US broker. Alaric is subject to ESMA (the EU equivalent) and ESMA does not have the same rules as FINRA for "small traders". This is the only difference which allows better margining. Please keep in mind that higher leverage is not subject to indiscriminate offering: each account is strictly monitored for proper Risk. As a broker which services professional traders it is quite different than a typical retails broker. Hope this answers your question. Regards.
@southall Thanks for your comment. The "Reg T" and "Portfolio Margin" is not to mislead about client asset protection (which there of course is). It is a reference point to distinguish between size of account and applicable inhouse rules. Hope it answers your concern. Regards.
@backuptiger Generally not a good idea. However a lot depends on what you view as "offshore". MiFiDII and ESMA is the furthest away from offshore regulators. All EU financial institutions abide by those strict rules and provide weekly reports to these centralized European regulators, despite the fact that it goes through the local country divisions. Bahamas or any sandy beaches may be a different story.
@alaric, your profile states that you are in Bulgaria, if so are you an employee of the company, live or work work, is Alaric registered company in Bulgaria or the Caribbean? if it's possible for you to answer a few more questions...thanks? related & expanded question ... does it need to Bahamas, what about another country? for the Bahamas does an account holder have to be a Bahamian resident to open & qualify for an account that has high leverage? or can high leverage be achieved with high net worth/accredited investor individuals outside Bahamas? or the setting up of a limited company/LLC with an address possibly qualify?
It might surprise you that Forexchief broker offers 1:100 on stock trading. You ask how? It is because they are not not held on the throat like the US regulated brokers. This one is serious for business.