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Day Trading Margin Rules from IB
- Thread starter tc
- Start date
paceadvantage,
The classification as a pattern daytrader is introduced, created and defined in the "new" daytrading margin rules.
All other "pattern daytrader" definitions have unofficial status.
I also have a Datek account. On May 28, 2001 I received email from Datek about the daytrading margin:
<i>Datek wrote:
"...Day trading margin rules are applied only
to accounts that exhibit a pattern of day trading, which is defined as
making three day trades within any 12-month period..."</i>
This is "just a Datek thing", this is Dateks' interpretation(more restrictive) of the rules and is only valid for Datek customers. Actually Datek created its' own definition of "pattern of day trading", which is nowhere to be found in the official rules (3 day trades within any 12-month period).
The "pattern daytrader" will start to exist on Aug.27 officially, it does not exist yet. Any such classification prior to implementation of the rules will be unofficial and will not have regulatory power.
Any rule has an implementation date, prior to which the rule is not officially valid.
Fohat
The classification as a pattern daytrader is introduced, created and defined in the "new" daytrading margin rules.
All other "pattern daytrader" definitions have unofficial status.
I also have a Datek account. On May 28, 2001 I received email from Datek about the daytrading margin:
<i>Datek wrote:
"...Day trading margin rules are applied only
to accounts that exhibit a pattern of day trading, which is defined as
making three day trades within any 12-month period..."</i>
This is "just a Datek thing", this is Dateks' interpretation(more restrictive) of the rules and is only valid for Datek customers. Actually Datek created its' own definition of "pattern of day trading", which is nowhere to be found in the official rules (3 day trades within any 12-month period).
The "pattern daytrader" will start to exist on Aug.27 officially, it does not exist yet. Any such classification prior to implementation of the rules will be unofficial and will not have regulatory power.
Any rule has an implementation date, prior to which the rule is not officially valid.
Fohat
Fohat,
Thanks for the clarification once again. OK, now that THAT's out of the way, let's clarify this "3 in 5" rule that people can't seem to pin down. It seems that IB is interpreting this rule differently then I did when I first read the SEC's intentions. Anyone care to provide a concrete definition of the "3 in 5" rule??
==PA
Thanks for the clarification once again. OK, now that THAT's out of the way, let's clarify this "3 in 5" rule that people can't seem to pin down. It seems that IB is interpreting this rule differently then I did when I first read the SEC's intentions. Anyone care to provide a concrete definition of the "3 in 5" rule??
==PA
3 - 5 rule :
Isn't that clear enough ? Has been posted twice in this thread now.
"New Day Trading Margin Rule :
Starting August 28th the NYSE will impose a $25,000 minimum equity requirement for âpattern day traders.â Effective September 28, the NASD will impose the same requirement. Consistent with the new margin rules, as of August 28th, if an IB customerâs margin account falls under $25,000 and the customer has opened and closed positions on THE SAME DAY day three times within five days, the customer will not be allowed to open new positions until the $25,000 requirement is restored or the five days have elapsed."
I understand it this way :
1.Example :
You start with 3 roundtrips on a Monday in your sub 25K margin account. Next time you'll be allowed to do 3 roundtrips is following monday ( 5 days later - actually, it would be saturday, but since the markets are closed on weekends .... ).
2. Example :
You start with 1 roundtrip on Monday, 1 one Tuesday 1 on Wednesday, next time you'll be allowed for 3 new roundtrips would be the following monday again ( when the 5 day period in which the 3 roundtrips occured, has elapsed )
The new rule will be in force as of Aug. 28th. for NYSE. This is a Tuesday. So one could do 3 rountrips in the period 'til Sunday ( if they use calendar days instead of trading days ). Next 5 day period would start on Monday the following week ( Sept. 3rd. - which is a holiday in the US )
For Nasdaq, the rule will start on Sept. 28th. which is a Friday. So one could do 3 roundtrips on this Friday and would have to wait for his next 3 rountrips until Thursday, Sept. 4th ( once again, if calendardays are used ).
However, if one doesn't trade on any of the starting days, the 5 day period will start the countdown with his 1st. completed intraday roundtrip following the day the rule has been imposed.
Sub 25K traders need not only to watch their intraday charts, level 2, indicators, etc. but also their calendar
;-)
Isn't that clear enough ? Has been posted twice in this thread now.
"New Day Trading Margin Rule :
Starting August 28th the NYSE will impose a $25,000 minimum equity requirement for âpattern day traders.â Effective September 28, the NASD will impose the same requirement. Consistent with the new margin rules, as of August 28th, if an IB customerâs margin account falls under $25,000 and the customer has opened and closed positions on THE SAME DAY day three times within five days, the customer will not be allowed to open new positions until the $25,000 requirement is restored or the five days have elapsed."
I understand it this way :
1.Example :
You start with 3 roundtrips on a Monday in your sub 25K margin account. Next time you'll be allowed to do 3 roundtrips is following monday ( 5 days later - actually, it would be saturday, but since the markets are closed on weekends .... ).
2. Example :
You start with 1 roundtrip on Monday, 1 one Tuesday 1 on Wednesday, next time you'll be allowed for 3 new roundtrips would be the following monday again ( when the 5 day period in which the 3 roundtrips occured, has elapsed )
The new rule will be in force as of Aug. 28th. for NYSE. This is a Tuesday. So one could do 3 rountrips in the period 'til Sunday ( if they use calendar days instead of trading days ). Next 5 day period would start on Monday the following week ( Sept. 3rd. - which is a holiday in the US )
For Nasdaq, the rule will start on Sept. 28th. which is a Friday. So one could do 3 roundtrips on this Friday and would have to wait for his next 3 rountrips until Thursday, Sept. 4th ( once again, if calendardays are used ).
However, if one doesn't trade on any of the starting days, the 5 day period will start the countdown with his 1st. completed intraday roundtrip following the day the rule has been imposed.
Sub 25K traders need not only to watch their intraday charts, level 2, indicators, etc. but also their calendar
;-)
Although the NASD starts the new rule Sept 28, it appears that IB will implement on Aug 28 for both NYSE and NASD.
On page 5 of this thread Huby addresses this. Also I started a thread to ask this question specifically: it is titled "def - question re: IB implementation of SEC rule"
and includes the complete IB statement as well as a response from def.
This is another question which has not been clearly answered. I hope that IB's programmers have taken measures to differentiate between NYSE and NASD trades, thus allowing an extra month for those who trade NASD exclusively.
However, the 'path of least resistance' may prevail...???
On page 5 of this thread Huby addresses this. Also I started a thread to ask this question specifically: it is titled "def - question re: IB implementation of SEC rule"
and includes the complete IB statement as well as a response from def.
This is another question which has not been clearly answered. I hope that IB's programmers have taken measures to differentiate between NYSE and NASD trades, thus allowing an extra month for those who trade NASD exclusively.
However, the 'path of least resistance' may prevail...???
Privateer:
I believe the new rules are based on business days rather than calendar days. In your example number 2: If a trade was opened and closed on a Monday, Tuesday and Wednesday; you would be in violation to execute three roundtrips on the following Monday. Tuesday/Wednesday/Thursday/Friday/(then)Monday would constitute a five day period in which you would have executed five roundtrip trades.
This is all a bit unbelievable, huh?
BSAM
I believe the new rules are based on business days rather than calendar days. In your example number 2: If a trade was opened and closed on a Monday, Tuesday and Wednesday; you would be in violation to execute three roundtrips on the following Monday. Tuesday/Wednesday/Thursday/Friday/(then)Monday would constitute a five day period in which you would have executed five roundtrip trades.
This is all a bit unbelievable, huh?
BSAM
Indeed, very confusing. As I said, I don't know whether calendar or businessdays will be used. Probably businessdays.
In any case, this whole discussion raises more questions than it answers.
Haven't asked the SEC, what happens, if I would daytrade the US markets via a foreign broker.
I'm german and I have also an account with a german brokerage firm which offers fast access to US Markets, speedy executions and RT quotes.
Current drawbacks : no margin , no shorting possible, comissions fairly high with 0.19% of the trade value/25 USD min. per trade )
However, there are no restrictions in the number of trades I could make intraday, let alone any restriction regarding account minimum size.
Well, I'm interested to see how all this turns out in the near future.
regards
In any case, this whole discussion raises more questions than it answers.
Haven't asked the SEC, what happens, if I would daytrade the US markets via a foreign broker.
I'm german and I have also an account with a german brokerage firm which offers fast access to US Markets, speedy executions and RT quotes.
Current drawbacks : no margin , no shorting possible, comissions fairly high with 0.19% of the trade value/25 USD min. per trade )
However, there are no restrictions in the number of trades I could make intraday, let alone any restriction regarding account minimum size.
Well, I'm interested to see how all this turns out in the near future.
regards