Reg T

Discussion in 'Wall St. News' started by stock777, May 16, 2005.

  1. Wasn't this already the case?
    The Federal Reserve recently clarified Regulation T, which has required that customers trading in cash accounts make full cash payment for each separate purchase. Under the new interpretive guidance, full cash payment has been strictly defined to exclude the proceeds derived from an unsettled transaction.

    This will mean that you will have to wait for a sell transaction to fully settle (typically 3 business days) before you can make a purchase using those funds.
  2. nkhoi


    that was what I understand when I took series 7 (failed) :(
  3. JackR


    It must have been ambiguous. In the past, in my IRA account (cash account), when I sold a stock I had for a week, say for $5K, I could buy something else the same day using the proceeds from the sale. However, if I got very lucky and the stock moved 20 percent the day I bought it and I sold $1K worth, I could not use that $1K until settlement three days later.

    As I interpret the news above, the same $5K would not be available for three days (settlement).

    Perhaps different brokers/clearing houses were handling it differently and the rule was clarified.
  4. avadon


    Use an overseas brokerage so that you get instant settlement on every trade (no sec & nasd regulation). Just make sure you have the discipline to not overtrade it though.
  5. mustang


    That is why I would like to see Reg T go away and have everything settle next day!
  6. You got this from an email from BrownCo, right?

    This is a blatant lie. If you email them back and call them on their bullshit, they will sheepishly admit that the Fed did no such thing, Reg T policy is unchanged, and they are changing their own house policy only because their software isn't sophisticated enough to detect free riding violations correctly.

    The actual Fed policy is that you can buy with unsettled funds in a cash account, but if you do, you cannot sell those shares until the original sale settles in 3 days. This is correctly implemented by several brokers including ScottTrade and Fidelity.

  7. Bowgett


    You are wrong about Fidelity. They will not stop you from free riding. My account was restricted for some time after I accidently did it. So be careful with Fidelity. Check you orders before you submit them. They will not stop you from free riding but they will restrict your account later :D
  8. OK. I don't have an account with them, I was reporting what I had heard. In any case, the point is that they do not prevent you from trading with unsettled funds in a cash account. That contradicts BrownCo's claim of new stricter Reg T guidelines.

  9. Well, only in America!

    We have to wait 3 days to have the trades settled.

    T+1 is the WORLD STANDARD now even in poorer countries like China and India.

    Time to change to better SERVE customers!