NYSE HITS DAY TRADERS WITH TIGHTER MARGIN RULE From WALL STREET JOURNAL, August 27th, 2001 By AARON ELSTEIN New York Stock Exchange, starting today, will require day traders to hold minimum $25,000, up from as little as $2,000, in their margin accounts to trade NYSE stocks; similar rule affects Nasdaq Stock Market stocks, effective Sept 28; NYSE rule defines day trader as anyone who buys and sells a stock in the same trading session at least four times a week (M) WALL STREET JOURNAL, 27th August 2001
New day trader rules From THE TIMES, August 28th, 2001 Chris Ayres The New York Stock Exchange yesterday unveiled rules aimed at raising the stakes for amateur day traders -the high-adrenalin US investors who dip in and out of stocks in the hope of making a fast buck. The exchange said that it would increase the "goodwill deposit" or margin account that day traders are required to post with their stockbroker before being allowed to trade, from $2,000 (Pounds 1,382) to $25,000 (Pounds 17,284). The exchange said that the move would protect brokers from losses that could be racked up by day traders in the current volatile market. Although the new rule will have little effect on professional day traders, it is likely to discourage many amateur investors -some of whom bet their life savings in the hope of cashing in on the Internet boom.Craig Schlifstein, of Blackwood Trading, which provides technology that gives day traders access to stock markets, said: "I don't know how relevant it is; it's sort of a day late and a dollar short. This is probably two years too late." The rule is expected to hit online brokers such as Charles Schwab, which have tried to lure amateur traders with low minimum account balances. (c) Times Newspapers Ltd, 2001 THE TIMES, 28th August 2001
NYSE's margin lending rules for day traders come under fire From FINANCIAL TIMES, August 28th, 2001 BY JOHN LABATE IN NEW YORK The New York Stock Exchange's new margin lending rules for day traders, which went into effect on Monday, were designed to help small investors who were borrowing at record sums during the height of the bull market in 1999 and early 2000. The new rules were seen as necessary to address concerns that too many small investors did not sufficiently understand the risks involved with the large amounts they were borrowing. Since the new rules were first issued for comment in January last year, they have been subject to criticism that will not go away. "Unfortunately, this rule came out rather late," said Ronald Shear, president of Carlin Financial Group, professional trading group. "I'm very glad they did it but I wish they would have done it a year or so ago to help people who shouldn't have been there. [Those investors] lost a lot of money and now are out of the market." Together with the Nasdaq, which will enforce similar tougher standards starting in late September, the new NYSE rules require active traders to put up at least $25,000 of their own funds in order to qualify for margin lending with a member brokerage firm. But the rule changes also relax the day trading margin maintenance requirement from 2:1 to 4:1, allowing investors who pass the $25,000 minimum to borrow a greater percentage of their investing funds than previously. Last year, the amount small investors were borrowing on margin was reaching record levels. Margin lending reported by NYSE member firms topped a record $278bn in March 2000, up 55 per cent from six months earlier. The latest figures, for last month, showed the amount of margin debt was down to about $165bn. When they were first proposed, some small investors complained they were being unfairly singled out. "It really isn't necessary to force small account holders out of the business of day trading," wrote one small investor regarding the proposed rules. "Why should the little guy be denied the same opportunities that more robust accounts have to enjoy the fruits of financial freedom?" Copyright Financial Times Group Section MktUS FINANCIAL TIMES, 28th August 2001
GLOBAL INVESTING: NYSE rules for day traders come under fire NEW MEASURES SEEN BY SOME AS TOO LATE: From FINANCIAL TIMES, August 28th, 2001 By JOHN LABATE The New York Stock Exchange's new margin lending rules for day traders, which went into effect yesterday, were designed to help small investors who were borrowing at record sums during the height of the bull market in 1999 and early 2000. The new rules were seen as necessary to address concerns that too many small investors did not sufficiently understand the risks involved with the large amounts they were borrowing. Since the new rules were first issued for comment in January last year, they have been subject to criticism that will not go away. "Unfortunately, this rule came out rather late," said Ronald Shear, president of Carlin Financial Group, professional trading group. "I'm very glad they did it but I wish they would have done it a year or so ago to help people who shouldn't have been there. (Those investors) lost a lot of money and now are out of the market." Together with the Nasdaq, which will enforce similar tougher standards starting in late September, the new NYSE rules require active traders to put up at least Dollars 25,000 of their own funds in order to qualify for margin lending with a member brokerage firm. But the rule changes also relax the day trading margin maintenance requirement from 2:1 to 4:1, allowing investors who pass the Dollars 25,000 minimum to borrow a greater percentage of their investing funds than previously. Last year, the amount small investors were borrowing on margin was reaching record levels. Margin lending reported by NYSE member firms topped a record Dollars 278bn in March 2000, up 55 per cent from six months earlier. The latest figures, for last month, showed the amount of margin debt was down to about Dollars 165bn. When they were first proposed, some small investors complained they were being unfairly singled out. "It really isn't necessary to force small account holders out of the business of day trading," wrote one small investor regarding the proposed rules. "Why should the little guy be denied the same opportunities that more robust accounts have to enjoy the fruits of financial freedom?" Page 23; Edition USA Ed2; Section GLOBAL INVESTING Copyright 2001: Financial Times Group FINANCIAL TIMES, 28th August 2001
COMPANIES & FINANCE INTERNATIONAL: NYSE changes borrowing rules NEWS DIGEST From FINANCIAL TIMES, August 28th, 2001 By JOHN LABATE NYSE changes borrowing rules The New York Stock Exchange's long-awaited rule change for margin lending practices by day traders took effect yesterday. The changes, which were originally proposed in January 2000, raise the minimum equity requirement for a "pattern day trader" from Dollars 2,000 to Dollars 25,000, which must be maintained in the account at all times. The amendment was intended to address criticisms that too many inexperienced investors were borrowing huge sums "on margin" from their brokerages for investing without a proper understanding of the risks involved. The rules also ease the proportion of funds an investor can borrow on margin, from 2:1 of his holdings to 4:1. Nasdaq will put a similar rule into effect next month. John Labate, New York Page 21; Edition London Ed1; Section COMPANIES & FINANCE INTERNATIONAL Copyright 2001: Financial Times Group FINANCIAL TIMES, 28th August 2001
NYSE, Nasdaq margin requirements for day traders rise to 25,000 usd From RBC NEWS, August 27th, 2001 Section: MARKETS NEW YORK (AFX) - Day traders will be required to have a minimum of 25,000 usd on deposit in margin accounts to buy shares traded on the New York Stock Exchange, according to a new rule going into effect today. The rule was filed by the NYSE with the Securities and Exchange Commission last year. A similar rule goes into effect Sept 28 for stocks traded on the Nasdaq Stock Market, said Tom Holloman, a spokesman for the National Association of Securities Dealers. "The minimum equity required for the accounts of customers deemed to be 'pattern day traders' shall be 25,000 dollars. This minimum equity must be maintained in the customer's account at all times," said the statement filing to amend rule 431. A "pattern day trader" is defined by the NYSE and the Nasdaq as a customer who executes four or more day trades within five business days in an account, provided the number of day trades is more than 6 pct of total trades in the account for the five-day period, said the statement. "The primary purpose of the proposal is to require that minimum levels of equity and margin deposited and maintained in day trading accounts be sufficient to support the risks associated with day trading activities," it said. Until today, the NYSE's rule 431 required only a 2,000 usd minimum to open a margin account for day traders. The NYSE first filed for implementation of new rules in Jan 2000 amid concerns that it was too easy for novice traders to trade without fully understanding the risks involved. The Nasdaq followed suit in Feb 2001. blms/cl/gc For more information and to contact AFX: http://www.afxnews.com and http://www.afxpress.com RBC NEWS, 27th August 2001
as far as it concerns protection for the broker - i guess a broker like ib was not at risk at all - since they will strictly liquidate any bad position automatically without giving a margin call - am i right? maybe def can tell us - ib updates buying power in realtime - so where is the risk? i always thought that EVERY broker handles buying power like this???
>maybe def can tell us - ib updates >buying power in realtime - so where >is the risk? One area of risk is a halt. There are others. JB
gerry875 If you were one penny under the margin requirment IB would automatically reject the order and tell you why. Usually within one second. It was a platform that enforced a greater discipline upon the trader. All of these LionSec postings are old news to us. The official NYSE screwing begins today 8/28/2001. And the NYSE Member firms will administer it more than likely across the board. It's just newsworthy to the non trading masses and the morons at CNBC who are dumbfounded by anything.
gerry, the risk is on gap moves and executions into potentially illiquid markets. On systemic moves (i.e. surprise fed rate cut, a huge hedge fund collapse, bank failure, etc), liquidity dries up and due to the gap in prices a large number of margin violations could take place at once.