New SEC rules

Discussion in 'Retail Brokers' started by jkm, Sep 27, 2001.

  1. jkm


    Does the new SEC regulations for daytraders to maintain a minimum $25000 affect cash accounts? That is can one still continue daytrading with a cash account of less than $25000?
  2. Fohat



    The new SEC rules affect margin accounts only, they do NOT affect cash accounts.

    Therefore, you can continue daytrading with a cash account with less than 25k, but not all brokers offer daytrading in a cash account yet, although it's allowed by the law. Cash accounts will probably move to those brokers which do.

  3. jkm


    Thank you Fohat. My broker claims the new rules also affect cash account. Do you which web site I can get the information that I will need to show my broker that cash account is not affected?
  4. A cash account can be used to day trade, however it's subject to T+3 settlement.
  5. Fohat


    Cash accounts are not affected, because both new rules are only related to margin requirements (NASD 2520 and NYSE 431 MARGIN requirement amendment rules). The new rules are only MARGIN requirement amendments of existing rules, therefore they don't affect cash accounts, because no margin is allowed for a cash account.

    There have been many threads on this topic. You may check out the recent where I posted a proof why "daytrading" in a cash account is permited by the regulations and how it's justified.

  6. Yoda


  7. jskeldon


    I read someone say on these boards in the past that the new rules apply only to the "same" stock. Is this true. For example can I selectively day trade ie. INTC, MSFT, AMAT, ORCL etc. a couple of times each during the same 5 day period and not technically run afoul of the pattern trading rules. I trade at IB. Any answers appreciated. Thanks.
  8. GaretJax



    I already made three roundtrip trades today with IB and I tried a fourth and it rejected it with a pattern daytrader message using a different stock. Apparently it doesn't matter if it is the same or different stocks. I am waiting for my futures account to be approved at ib and I will be trading the nasdaq e-mini. Damn and I was up 1K today.

  9. Fohat



    Some brokers interpret the purchasing and selling of the same security during the day as only 1 daytrade. Thereofe, with those brokers you can trade hundreds of times the same stock all day and this will be considered one daytrade.

    With less than 25k, maximum of 3 daytrades in 5 days are allowed before you are declared a pattern daytrader.

    With less than 25k margin account with IB, only 3 daytrades in 5 days are allowed and unlimited swingtrades are permitted.

    Partial fills are counted as 1 daytrade at IB. But IB seems to count each buy/sell of the same security intraday as 1 daytrade, therefore you can't trade the same stock all day, because that'll generate multiple daytrades.( Buy&sell ORCL - 1 daytrade, Buy&sell ORCL again - 2nd daytrade, maximum 3)