I have been having problems with Schwab. They claim I traded non marginable securities in my margin

Discussion in 'Professional Trading' started by invortex, Dec 12, 2021.

  1. invortex

    invortex

    They claim I have traded non marginable securities like GME in my margin account. I have other accounts with Fidelity and IB and normally, they would not allow such trades to go through. Now Schwab has let that go through and due to SEC laws, I am not allowed to trade in margin for 3 months.

    Has anyone deal with this issue? How can I set up my platform so it doesn't allow this kind of trade to go through in the first place.
     
  2. vanzandt

    vanzandt

    It's right there on the confirmation window.
    It's a red warning.

    Warning: The security you are buying is not marginable.

    They let you do it because maybe you really want the stock and you'll wire in the money by the eod.
    I'd rather have the choice.
    But next time look for that red lettering before you hit send.

    Ask for a one time exemption, they're allowed to give you this if you haven't messed up in the last 6 months.
     
    Last edited: Dec 12, 2021
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  3. you would think the software would be robust enough to block you from executing
    the trade... i guess thats asking too much lol.
     
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  4. Robert Morse

    Robert Morse Sponsor

    We allow stocks that have no leverage like stocks under $3 and those we hold had higher levels in a margin or cash account. In the margin account, we just require more equity to cover those symbols.

     
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  5. Sig

    Sig

    You're not telling us the whole story here. You can certainly trade non-marginable securities in your account at Schwab. You simply can't use margin to trade non-marginable securities. Which means you have to wait until they settle before you sell them unless you have enough in settled funds to cover all your purchases made before settlement.

    For example, imagine you had $10,000 in extra cash in your account. You bought $5,000 of GME and sold it 5 minutes later. No problem. Then 10 minutes later you buy $6,000 in GME. Still no problem. Then you sell your $6,000 of GME 15 minutes later. Now you have a problem. Neither of those GME trades have settled, and you used $5,000+$6,000=$11,000 to buy them but only had $10,000 in your account. You still could have wired an extra $1,000 in by the end of the day and been fine. Or waited 2 business days to sell that position and you would have been fine. But you can't spend $11,000 on non-marginable securities when you have only $10,000 in your account.

    Your violation wasn't holding non-marginable securities. It was a "good faith" or "freeriding" violation of buying a security and then selling it before paying for the initial purchase in full with settled funds. You would get this violation with any regulated U.S. broker, it's a requirement. It's possible you had enough free cash in other accounts at other times that you didn't run afoul of this, but it's definitely not the case that they ignore this rule while Schwab doesn't.
     
  6. %%
    I think they did/warning ;
    but it can be missed. I remember Fidelity sent me a message on that, back in the days of commissions................................................................... Actually the SEC is doing a study on quicker clears, banks clear checks much quicker than they used to, so seems fair for all:caution::caution::caution:
     
  7. I actually like SSE for it is. It's clean interface with all the "excellence" you expect out of an IE based app. Bugs and crashes galore, but it's much more customizable/usable than ToS for 95% of users.

    But they will let you do "illegal" things.

    Fidelity on the other hand will restrict your account so much (for made up things sometimes even) that they may as well be a bank.

    and yes, there is a warning in the box.

    The issue is, there is ALWAYS a warning in the box. Usually a paragraph about HTB securities or something. So if you make many trades day, you're absolutely used to ignoring it.

    You even have to scroll down sometimes to see whether a real error message exists.
     
    Last edited: Jan 7, 2022
    murray t turtle likes this.