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4 to 1 Margin
- Thread starter Commisso
- Start date
Hi, 4-1 Margin ??? 10,000 = 40,000 that right instead of 2-1, could you elaborate on this a little whats happening on sep 2001. Oh and what would be the minimum ammout of $$ to get 4-1 I have seen 10-1 but only at a firm + u gotta have 50k. If I had 50k what the bloody hell would I be doing using 10-1! U gotta a site with any further info?
Thanks.
Thanks.
Que,
There's a thread regarding the new SEC rules that go into effect at the end of September, but to recap briefly, all daytraders will be required to maintain a minimum of $25,000 in their accounts, and all traders who meet this requirement will have the 4-1 buying power.
http://www.nasdr.com/pdf-text/0126ntm.txt
There's a thread regarding the new SEC rules that go into effect at the end of September, but to recap briefly, all daytraders will be required to maintain a minimum of $25,000 in their accounts, and all traders who meet this requirement will have the 4-1 buying power.
http://www.nasdr.com/pdf-text/0126ntm.txt
WOW,
I have just re-read the IB FAQ and they do state it clearly that they will not provide the 4-1 margin. This is ridiculous, 4-1 margin was the only good thing that came out of the new SEC rule and IB will not even provide that.
I am outraged!!!
I thought that 4-1 margin was part of the rule. How can IB choose tom comply with the 25K minimum portion of the rule and at the same time choose to ignore the 4-1 margin portion???
IRAF
I have just re-read the IB FAQ and they do state it clearly that they will not provide the 4-1 margin. This is ridiculous, 4-1 margin was the only good thing that came out of the new SEC rule and IB will not even provide that.
I am outraged!!!
I thought that 4-1 margin was part of the rule. How can IB choose tom comply with the 25K minimum portion of the rule and at the same time choose to ignore the 4-1 margin portion???
IRAF
Just a note on the new margin rules. First they only apply
to 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:
Question:
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 âday traderâ as someone who buys and sells a stock in one day (known as a âround tripâ) four or more times over a five-day period, unless those trades comprise less than 6% of the traderâs 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 youâll 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 â 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.
gweissman@stocktrade.net
Please note that these rules effect pattern daytrading customer accounts only, not professional firms organized as
L.L.C's.
to 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:
Question:
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 âday traderâ as someone who buys and sells a stock in one day (known as a âround tripâ) four or more times over a five-day period, unless those trades comprise less than 6% of the traderâs 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 youâll 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 â 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.
gweissman@stocktrade.net
Please note that these rules effect pattern daytrading customer accounts only, not professional firms organized as
L.L.C's.
Foghat,
I believe you are correct. Individual firms can apply a higher standard to the rule. A NASD firm could say we do
not want to give 4 to 1 margin for daytraders because the firm feels this is too much leverage to allow. If your
firm feels this way , you can leave and trade at another
firm. The NYSE rule 431 allows up to 4 to 1 and $25,000
minimum equity. If Interactive Brokers or any other firm
does not want to give 4 to 1 margin, I believe that is the
firms right to do so. See NYSE Memo 01-9 at:
http://www.nyse.com/pdfs/im01-9Microsoft Word - Document in 01-9.pdf
Gene Weissman
Managing Member
Lieber & Weissman Sec., L.L.C.
gweissman@stocktrade.net
I believe you are correct. Individual firms can apply a higher standard to the rule. A NASD firm could say we do
not want to give 4 to 1 margin for daytraders because the firm feels this is too much leverage to allow. If your
firm feels this way , you can leave and trade at another
firm. The NYSE rule 431 allows up to 4 to 1 and $25,000
minimum equity. If Interactive Brokers or any other firm
does not want to give 4 to 1 margin, I believe that is the
firms right to do so. See NYSE Memo 01-9 at:
http://www.nyse.com/pdfs/im01-9Microsoft Word - Document in 01-9.pdf
Gene Weissman
Managing Member
Lieber & Weissman Sec., L.L.C.
gweissman@stocktrade.net