IB not offering 4-1 margin!!!

Discussion in 'Trading' started by IRAF, Aug 23, 2001.

  1. RJanes


    Got an email the other night.. Terra Nova will be offering the 4-1 for those who qualify.

    "*Day-trading buying power for Pattern Day Trader accounts will be computed at up to four times maintenance margin excess (account equity less any maintenance requirement) in an account."
    #21     Aug 24, 2001
  2. I checked out Terra Nova online. The trade off seems to me to be that I can get 4:1, but their commissions will eat up my profits...or at least put a hell of a dent in them.

    I too am considering my options even tho the $25k rule doesn't directly affect me ....the search for IB's replacement is on...or maybe keep IB and dive into futures...hell, I don't know.

    Have a good weekend everyone...
    #22     Aug 24, 2001
  3. RAY


    Well, I will soon be closing my IB account because of this. I was all excited about the 4 to 1 margin, and spent hours upon hours "re-vamping" my trading (business plan), and I have been paper trading 4 to 1 (in addition) for some time now. I really love my IB account (never complain), but I will now go elsewhere.

    Thanks for all of your input def. You were (are) priceless to all of us at EliteTrader that had accounts IB.
    #23     Aug 24, 2001
  4. Just a note on 4 to 1 margin. I'm not going to hype my firm
    or any other. It's up to each individual firm(NASD member) if they want to extend 4 to 1 margin. If the firm feels that
    they do not want to extend 4 to 1 margin, it's the firms choice. Call any of the NASD firms mentioned in the brokers
    board on elite trader and see if they will allow up to 4 to 1 margin for daytrading.

    First the new rules only apply
    NASD customer accounts and only for "Pattern Daytraders".
    Here is a synopsis of the new rules. Please check with your
    introducing brokers margin dept. These new rules do not apply to L.L.C.'s . The information was taken from the SEC website at http://www.sec.gov , NYSE site at http://www.nyse.com and Strategic Traders at http://www.strategictraders.com:


    What are the new rules on day-trading margin requirements? And when does the new $25,000 minimum balance go into effect?

    Answer: 08-17-01

    On February 27, 2001, the SEC approved rule changes proposed by the New York Stock Exchange and NASD Regulation, Inc. aimed at imposing more stringent margin requirements for day-trading customers. The new rules go into effect on September 28, 2001. For more information, please see the NASD's Notice to Members and the New York Stock Exchange's Information Memo.

    See NYSE memo at http://www.nyse.com/pdfs/im01-9Microsoft Word - Document in 01-9.pdf

    At http://www.strategictraders.com ,they commented on the
    important effects of the new rule on traders as follows:

    New NASD/SEC Rules Affecting Short-Term Trading

    The rule change will affect day traders. The rule defines a “day trader” as someone who buys and sells a stock in one day (known as a “round trip”) four or more times over a five-day period, unless those trades comprise less than 6% of the trader’s total trades. So if you make 4 or more day trades over a five-day period and these trades represent more than 6% of all your trades, this rule affects you.

    · Day Trading Buying Power will be increased from 2-to-1 up to 4-to-1. So you’ll be able to buy up to four times the amount of excess equity in your account. This is a dramatic increase in buying power for day traders!

    · The rule will require an increase in the Day Trading Minimum Equity Requirement. You will need to maintain at least $25,000 equity in your account in order to day trade.

    · The due date for day trading margin calls will become 5 business days, instead of 7 business days.

    · Money deposited into an account to meet a day trading margin call would have to remain in the account for at least two days (rather than the current one day) after the close of business the day the deposit is made.

    · If you have a day trading call that has not yet been met, your account is restricted to 2-to-1 Day Trading Buying Power based upon your total trading commitment until the call is covered. Also, the call for that day is not calculated based on Time & Tick. That means you would be responsible for 50% of all your entry positions added together.

    · The sale of an overnight long position, or the repurchase of an overnight short position would not be considered an entry position, so long as you did not add to that overnight position first (e.g. you are long XYZ overnight and then buy more shares of XYZ before selling XYZ – that would be considered an entry position because you bought more shares before selling).

    · Day traders cannot use guarantees between customer accounts at the same broker-dealer (a.k.a. Cross-Guarantees) to meet the Day Trading Minimum Equity Requirement or Day Trading Margin. So a day trader cannot avoid a margin call by having guarantees from the accounts of other customers at a broker-dealer. Each day trading account would be required to meet its margin and equity requirements independently by using funds on deposit in that account.

    Gene Weissman
    Lieber & Weissman Sec., L.L.C.

    Please note that these rules effect pattern daytrading customer accounts only, not professional firms organized as
    #24     Aug 24, 2001
  5. def

    def Sponsor

    Sorry to hear of your decision. I wouldn't rule out 4:1 being granted in the future. But for starters, margin isn't changing at IB. If I hear anything, I'll post. Best of Luck.
    #25     Aug 24, 2001
  6. silvius


    Does anyone know if other deep discount online brokers will be offering 4 to 1 margin (ameritrade, datek, etc.), or is the 4 to 1 margin primarily a perk for more expensive direct access brokers?
    #26     Aug 26, 2001
  7. 1) Cybertrader offers 4:1 margin for people with MARGIN accounts (i.e. people who will be subject to the new $25k SEC regulation).

    2) Cybertrader also offers real-time buying power in CASH accounts for people with less than $25k, effectively allowing such people to trade intraday on the longside to their heart's content e.g. they can trade the value of their account as many times as they wish, so long as their open positions are not worth more than their account balance. CASH accounts are not subject to the new SEC regulations, which explicitly relate to MARGIN accounts. As such, the designation of Pattern Day Trader cannot be made for people trading in a CASH account. The trick is simply to find a broker with real-time buying power, so as not to wait for T+3 settlement. Cybertrader offers this facility. IB currently doesn't.

    One would anticipate that IB will be forced in due course to change its currently stringent stance on both 1) and 2), in order to avoid its customers (BOTH customers seeking 4:1 margin AND less well capitalised customers seeking the ability to trade in a cash account) moving over to its more expensive competitors.

    #27     Aug 26, 2001
  8. tradeRX


    Has anyone come across in their cyber travels any info pertaining to the number of traders currently trading with less than 25K?

    I suspect IB is going to lose a LOT to those like Cybertrader if they don't acquiesce to this "real time buying power" in cash accounts...regardless of the $10 dollar tickets with Cyber. Obviously, faced with paying higher tickets or no trading most will opt for the former. IB better get with the program or lose what may be a substantial client base.

    #28     Aug 26, 2001
  9. Magna

    Magna Administrator

    regardless of the $10 dollar tickets with Cyber...

    I wish it were so. CyberTrader may have an introductory (i.e., 1st month) ticket price of $9.95 but their normal ticket charge is $14.95 just like many other direct access companies like Terranova-MB, Terranova Online, Real Tick, etc.

    Cyber reduces the ticket charge to $12.95 with greater than 250 trades in a month, and further reduces it to $9.95 with greater than 500 trades.
    #29     Aug 26, 2001
  10. tradex21


    It's hard to beat IB's commission structure. I've been with them for four months and on active days I've saved about $150-200.00 a day. BUT this is the last hurrah for our trading opportunities. The Game is over boys and girls unless you are a well capitalized swing trader. These rules will more then likely take 70-80% of us out of the Game and kill off the intraday momementum move. Also the SEC has been battling for years to encroach on CFTC turf and when they do they'll put margin requirments on futures so high Bill Gates won't be able to trade a ten lot. Hello to the bigger spreads again goodbye to direct access. WHO WAS ON OUR SIDE LOBBYING FOR US. Hey but Thank God we've been protected from ourselves!!
    #30     Aug 26, 2001