Hello, If the brokers such as IB, Datek ... are trully opposed to the new rule as they claim to be one of the possible solutions could be that they partner with some financial institution who would deposit part of the 25K required sum on behalf of the trader but with the condition that the trader can not use it for trading. For example, if a trader has 15K of his own capital the lending institution would provide another 10K or more but with the assurance from broker that the trader will not be able to use it for trading. The money would just sit there for the sake of satisfying the SEC rule. Of course trader would pay interest on the sum (lets say 10%). In that case everyone wins , broker because he has a paying customer, lending institution because they make interest without any risk whatsoever, trader because he can trade with 4:1 margin, and even SEC would know that if someone is going to such lenghts in order to be able to trade must be serious about it and thus will not be an easy prey. My two cents.
Number 1) its illegal 2)there is always risk when you trade on margin. Example: If you only had let say $5K in your account, but were able to "borrow" another $20K giving you now $100K in buying power (4/1 with $25K), your account would only need to go down %5 before who'm ever you borrowed money from would be at risk. If you hold stock overnight that's not too much cushiee for your lenders tushiee. However, one point that has been discussed on this board at various posts is getting your own financial backer, and forming a partnership or some other sort of entity.
Plenty of firms already do this. They hold your money as a deposit and label you as a proprietary trader. When you lose money, it comes out of your deposit. Essentially you are trading your money. In most cases the firm also tries to take a cut of your profits, over-charge commissions, and put you under a contract. This all seems a little shady to me.
"Plenty of firms already do this. They hold your money as a deposit and label you as a proprietary trader. When you lose money, it comes out of your deposit. Essentially you are trading your money. In most cases the firm also tries to take a cut of your profits, over-charge commissions, and put you under a contract. This all seems a little shady to me." Mugshot--> There are some shady firms that do this, but there are shady people in every business. You just have to avoid them, there are also good firms to trade for. Echo and Lieber to name two. I trade through Echotrade and I can vouch that they, and some of their competitors, are not shady. I utilize as much as 30-to-1 leverage intraday at times, I pay under a cent (.90 cents after rebate) per share, I keep 100% of what I make, and I have no contract -- could close my account tomorrow and have my money back in 5 days. I know Echo is good, I have heard that Lieber is good too. Margin calls should be a thing of the past for anyone who makes their living from the markets. Whether it is 2-to-1, 4-to-1, whatever, if you have to worry about stuff like that I highly recommend you call a leverage firm and talk to them.
From what you describe, EchoTrade sounds like a decent firm. The fact that you can keep 100% of your profits and there is no contract sounds good. Also .09 commission is pretty good. Just curious, how many shares do you need to do per day to receive the .09 rate? What software do they use?
They use two different software platforms. Most guys use ECHOtrader, which is their own brand of VTS. Some guys use First Alert (http://www.neovest.com ). As far as they say, they are the only firm in the world that has access to the order entry version of First Alert right now. It is really cool too, worth checking out. Nice filtering capabilities, great charts. Guys who avg. over 50,000 shares a day (1 MIL a month) trade at the .90 rate, they have a 4 Million share club that trades at .80 cents per share. It is the best deal I have found.
But you need to be a prop. trader at all these firms and have a license correct? I think the original post was concerning retail accounts in general. However, I fully agree with both of you that prop. trading is a viable solution for someone who is going to have a problem meeting the $25K min equity requirements in September. But on another note, I think this is what the SEC's intentions may have been. Get people who want to "daytrade" licensed and now it eleminates the legal haggalings of people who lose money. Now there is no one to place blame on since they are licensed and knew the risk's involved.
Thanks Jim, That commission schedule seems very good. I might go take a look at one of their offices.
What is the exact date that the new SEC rule goes into effect? Beginning of Sept? End of Sept? I've heard that Sept. 28th is the exact date. Is this right?
Correct, the exact date it takes effect is Sept. 28, 2001. Futures on Individual stocks will be allowed to trade in late December 2001. Fohat