IB advisory to Accounts on Sept. 7

T

tradex21

I received an email from IB to all account holders yesterday advising yes they are offering 4/1 margin on all $25K+accounts and an advisory on how unfair they thought the new rules are and to vote with your feet and take your business to other venues such as futures, options and offshore. Also I have been in touch with the NFA in Chicago and single stock futures should get a December launch. 100 share contracts, appx. 20% margin and folks the volume will be enormous in these instruments, particularly in the big cap stuff. The securities markets shylocks have maybe really shot themselves in the foot this time. Within a matter of months they may be adjusting their closes to the futures settlements, you have no conception how big the volume in Cisco, AOL etc. could be, and I'm talkings 100's of thousands of contracts a day! Keep your powder dry!
:cool:
 
From what I have read the 4 to 1 margin will only apply to daytrades, in and out same day, but if you hold till next day it is 2 to 1 margin. All I know its going to be a mess since every time I read it there is something I am just not sure of due to the wording.

Side note, I was looking at the Ameritrade site and they list a monthly total trade amount. Early 2001 monthly totals were 80k up and over 100k then Aug was 66k. Be interested to see how the last qtr works out.
 
This is interesting:

IB's implementation of the "Day Trader" rules is as follows:

A customer will be deemed a "Pattern Day Trader" when they make more
than 3 day trades (open and close a position on the same day) within 5
business days.
As of September 28, 2001, "Pattern Day Traders" with greater than $25,000
in equity will only be subject to a 25% margin requirement during normal
market hours. On each day at 3:55 ET the regular maintenance margin
requirement of 30% will go into effect until normal market hours resume the
next business day, at which time it will again drop to 25%. These
customers will continue to be defined as "Pattern Day Traders" for a year
after they are last put into this category.
"Pattern Day Traders" with less than $25,000 in equity will not be able to
open any new positions at any time subsequent to having bought and sold
the same stock on the same day three times with the last five business
days. These customers will continue to be defined as "Pattern Day
Traders" until less than 3 day trades are made within the last 5 business
days.
Cash accounts will not be able to use sales proceeds for new purchases
until the third business day following the sale.

If you were to trade different stocks each day are you exempt from the 25K min margin rule?
 
Originally posted by ron2368
From what I have read the 4 to 1 margin will only apply to daytrades, in and out same day, but if you hold till next day it is 2 to 1 margin. All I know its going to be a mess since every time I read it there is something I am just not sure of due to the wording.

Side note, I was looking at the Ameritrade site and they list a monthly total trade amount. Early 2001 monthly totals were 80k up and over 100k then Aug was 66k. Be interested to see how the last qtr works out.
More...

Ron,

Under these new rules, swing traders should also have their margin increased, with regards to initial positions. The overnight margin requirement has always been and remains at 30%. However, you could never enter a position beyond a 2-1 margin ratio so swing traders were left with 2-1 margin. However, under these news rules, daytrades have a 25% margin requirement while the 30% overnight rule still holds. So now, swing traders get a 3.33-1 margin ratio.

At least this is how I interpret the rules. Someone correct me if I'm wrong.
 
Since the rule would not be in effect until Sept. 28, does it mean that one will be deemed a PDT if he/she makes more than 3 day trades within 5 business days AFTER Sept 28?

And here's what's really confusing:
"These customers will continue to be defined as "Pattern Day Traders" until less than 3 day trades are made within the last 5 business days. "

So if I make more than 3 day trades in one week, I will be deemed a PDT, and would not be able to use margin if my account is under $25k. But if I step back and take a break the next week, I will again not be a PDT? And I could again use marign to day trade?
 
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