IB cash accounts...

Discussion in 'Interactive Brokers' started by Yoda, Aug 17, 2001.

  1. Yoda


    Does anyone know of a broker that lets daytrade in a cash account? Answer to IB no cash account daytrading, should be run, run, run...

  2. ktm


    It seems like all you would need is self clearing and real time updating. Waterhouse does not update real-time and Datek gives you "daytrading buying power" set once a day, so they won't work. Take a look at Brown... brownco.com. I think you need 15K to open there.
  3. Yoda


    IB clearly states:

    Q. Can I day trade in a US-stock cash account with IB?
    A. No. Regulation T issued by the U.S. Federal Reserve Board prohibits day trading in a cash account.

    Doesn't this apply to other firms as well?

    Is anyone currently daytrading cash account with IB?


  4. Fohat



    Regulation T allows "daytrades"(purchasing and selling of the same security on the same day) in a cash account, provided that you have the funds before each purchase.
    Regulation T does NOT prohibit daytrading in a cash account in all cases. That is, regulation T allows hundreds of "daytrades" to be made in a cash account, provided that
    there are sufficient funds in the account prior to each purchase.

    Therefore, every self clearing and realtime (buying power) updating broker can offer multiple "daytrades" in a cash account. imo

    Daytrading is defined as an activity in a MARGIN account, therefore NO activity in a cash account is considered daytrading. Hence "daytrading in a cash account" is an oxymoron.

    By "daytrading in a cash account" previous posters obviously mean multiple daytrades in a cash account. For example a typical question is: "Can I daytrade 1000 shares of CSCO in my 20k cash account?" by that it's usualy meant:
    "Can I buy and sell subsequently 1000 shares of CSCO twenty times in a day in a 20k cash account" Yes, regulation T allows that (under certain conditions imo).

    Here's what Regulation T states:
    Regulation T

    Section 220.8 Cash account.
    (a) Permissible transactions. In a cash account, a creditor, may:
    (1) Buy for or sell to any customer any security or other asset if:
    (i) There are sufficient funds in the account; or
    (ii) The creditor accepts in good faith the customer's agreement that the customer will promptly make full cash payment for the security or asset before selling it and does not contemplate selling it prior to making such payment;

    Hence, in layman terms: Can we "daytrade in a cash account"?Yes, if the broker is self clearing and realtime updating.

    Anyone who claims the opposite must show which part of regulation T prohibits daytrading in a cash account, there's no such part imo. But obviously to claim that, one has to at least read Regulation T, not just repeat like a parrot not always valid conclusions imo.

    Those brokers, which refuse to allow multiple daytrades in a cash account will probably loose their <25k daytrading customers to those that do.



    Read the rule so you don't look like a fool.
    Regulation T: http://www.bankersonline.com/regs/220/220.html
  5. Yoda


    <<<<Uhhh...I think you have some catching up to do.


    That's right Turok, I probably do...

    Thank you Fohat for lengthy explanation,

    And all of you together, Thank you

  6. def

    def Sponsor

    I'm afraid this is the problem:
    (ii) The creditor accepts in good faith the customer's agreement that the customer will promptly make full cash payment for the security or asset before selling it and does not contemplate selling it prior to making such payment;

    IB is going to stop allowing cash to be utilized until settlement (i.e. you will only be allowed to trade on settled cash). However, if sufficient cash is in the account there are no restrictions on day trading.
  7. bronks


    Speaking for my under-capitalized self, if I'm not allowed to daytrade with a cash account because of clearing issues, I may have no choice but to swingtrade. Since I switched to I.B. from Datek, I've actually been profitable trading 100 share lots for as little as .12 scalp or more, 25-30 roundtrips per day without getting burnt by commissions. I.B. has been my savior. And low stock prices. I guess what I'm saying is this: new daytrading rules, not being able to short, cash account stipulations, etc., treading water with sharks circling and buzzards over-head... I think I'm toast. No offense to swingtraders but it's just not the same. Any guidance would be greatly appreciated.

  8. Sorry, I have a clarification question:

    Usually, brokers with a tight interpretation of reg T will allow you to trade "through your net worth" once per day and brokers with a loose interpretation will immediatley release buying power so that you can buy and sell all day. Will IB be implementing this type of system? Or will I have to wait three days before being allowed to trade again?

    I know IB only follows the rules, and is in fact very vocal when it comes to opposing stupid regulations, so don't be offended that I say how completely idiotic I think this whole thing is.
  9. def, could you clarify that. Are you saying that in a 10K cash acct , if I buy 10k worth of stock and sell it, I now can't trade the acct for three days?

    Certainly not the case as of now, are they really thinking of such a thing? I hope I misunderstood ;-)
  10. def

    def Sponsor

    unfortunately from what I've read internally it seems your funds will be locked up until settlement. I'm not 100% positive but that looks to be the case. My read on the situation is that a cash account will be treated purely as a cash account. Since IB systems are capable of T+0 settlement I'll bring up the suggestion to see if there is a legal way to settle a cash account faster than T+3. (I wouldn't be too optimistic about this because the counterparty of any transaction is most likely not IB).
    #10     Aug 23, 2001