Huge TWS bug (for short swings)

IB accounts under 25k

I thought you might be interested in this correspondence.

I sent this e-mail to IB’s management:

Dear Sirs

I have under 25k margin account.

I would like to swing trade in the following fashion:

Cover yesterday's short sale (buy)
Enter a new short sale (sell)

Your software counts, wrongly, these transactions as 1 daytrade and locks the account after a few transactions - thinks I am 'pattern trader'.

I would very much appreciate your explanation or any suggestion to avoid this problem.


Response came back:


Dear Trader,

Thanks for your email.

This is the way that our system is reading these. I apologize for any inconveniences that this may cause to you.

Sincerely, Aimee IB Customer Service



How about that!

 

I don't believe this is a bug of IB. Its rather the strict interpretation of nasdaq rules, which state that a daytrade is the buying and selling of the same security on the same day, regardless of opening/closing positions.

 

You are fortunate that IB gave you such a long winded and detailed response.

:eek:

 

Actually, I usually get a pretty well-thought out response to the questions I send in via e mail.

-dude

 

just depends on who is doing the answering.

the rules are buying/selling in the same day. ib simply looks at the number of trades opening and closing on the same day. It is not a bug. If you sell and buy on the same day - regardless of your previous position, it is interpretted as a day trade. in effect what you are trying to do is find a loophole in the rules.

 

Opening a position (long or short) one day and closing that position the following day is a swingtrade and not a daytrade.

Opening a new swingtrade should be not linked to closing yesterday’s swingtrade and counted as a round trip.

TWS programmers should be able to look at the open positions and make the appropriate (correct) decision.

 

miki,
is this your interpretation or the SEC's.

 

I have no comment on SEC rules, but…

I just don’t see any reason why the short swingtrades are treated differently by TWS from the long swingtrades.

I was hoping to open a trade one day and close it the next day and thus come as close to ‘real’ trading as permissible under the existing SEC rules.

But, what do I know…

 

Weird patterndaytrader rule isn't?

Does this also mean if you buy QQQ on day 1, sell it on day 2
that you cannot buy QQQ again on day 2 without it being called
a "daytrade"? If so, then this is stupid.

This dumb rule also prevents SWINGTRADING in under 25K
accounts! It is obvious!

No way in Hades is this type of trading "daytrading". Somebody
better call the SEC.

Next thing you know, you will not be able to sell your stock at
all. You will have to "buy and hold" forever and hope the
company doesn't go bankrupt.

Maybe this is what is really behind this rule. Only the bigshots
can get rid of their stock when it is tanking like ENE, KM, ect.

I don't think this rule was made to stop this type of trading.
And it is obviously not trying to get around any type of rules.
It is simply: buying one day and selling the next. Or selling
one day and buying the next.

Who is the SEC trying to protect anyway? The little daytraders
or their own big fat butts?

 

Actually this rule of treating such a set of transactions as a daytrade was specifically repealed with the new SEC daytrading margin rules that introduced the 25k limit.

Dave