IB and have i stepped into the bizzaro world

[LA ECHO]

Not sure if IB will do it but you can specify cash settlement on a trade. That means it clears in 1 day instead of 3. If they accept cash settlement the money will be available to you on the next day. Sounds like you will still run into some PDT issues if you continue to trade that way though.
When you put on a trade that settles 'regular way' the money for the trade is due by settlement date T+3. That means that you owe your broker that money on T+3. When you sell, the person or firm that bought your stock owes your broker the cash on T+3. That is what the clearing process is all about- the time it takes for the 2 parties to exchange certificates for $$. Even though this is all done electronically now the old T+3 rules still exist. Most brokers that are not full service brokers will require the cash to be in the account before placing the trade, just to avoid having to worry about collecting the money from you by T+3. Hate to say it and I agree its a pretty dated method but IB is right on this one.

 

[mail2smitty]

The only time I've had this problem is when holding overnight.
My current broker calculates intraday trading capital differently
then overnight capital in both cash and credit accounts.
Did you hold some of your first trades overnight?

 

[gaj]

shaman - unfortunately, the SEC has decided to screw traders with this 25K rule.

yell at the SEC, though it won't do much good. don't use the "but i did it before" argument; instead, try freedom to do whatever the hell you want with your money one. or restraint of trade, or something like that.

 

[Shaman]

Thx 4 the response LAecho!

thx dude that was the kind of answer i was looking for... guess i just go back to datek and learn how to be a expert swing trader to eat those $21 fees *grin*

 

[LA ECHO]

Originally posted by Shaman
Thx 4 the response LAecho!

thx dude that was the kind of answer i was looking for... guess i just go back to datek and learn how to be a expert swing trader to eat those $21 fees *grin*

Or you could take a little test called the Series 7 and join the ranks of the hated "professionals".

 

[CarlErikson]

Originally posted by LA ECHO
When you put on a trade that settles 'regular way' the money for the trade is due by settlement date T+3. That means that you owe your broker that money on T+3. When you sell, the person or firm that bought your stock owes your broker the cash on T+3. That is what the clearing process is all about- the time it takes for the 2 parties to exchange certificates for $$. Even though this is all done electronically now the old T+3 rules still exist. Most brokers that are not full service brokers will require the cash to be in the account before placing the trade, just to avoid having to worry about collecting the money from you by T+3. Hate to say it and I agree its a pretty dated method but IB is right on this one.

Assuming what you say is the correct way to think about this issue, then what about the following:

Suppose I have X dollars in a margin account and I buy X dollars of a stock and then I sell X dollars of that stock. Then I do this again 9 more times. Why do I not need to pay debit interest for my trading on that day? Didn't I have to borrow money (9X) in order to do my last 9 round trips? If not, why not? If I didn't borrow money, then why can't I do this in a cash account (especially if the brokerage requires the cash to be in the account before purchase, i.e., like IB)?

I understand that these 10 round trips are not permitted under current SEC guidelines in a cash account (although some brokerages allowed this type of trading until just recently). However, I look at these rules and just shake my head. Idiotic and outdated.

Let's assume that your brokerage prohibits buying of securities in a cash account unless your money is already in your account (i.e., like IB). Assuming this, I don't interpret Regulation T as prohibiting daytrading in a cash account (i.e., it is not freeriding). Of course, I'm just a dumbshit, and the SEC knows what is in my best interest. If the SEC really wants to enforce these retarded rules, at least they could make them explicit.

Carl

 

[ddefina]

Originally posted by Shaman
Thx 4 the response LAecho!

thx dude that was the kind of answer i was looking for... guess i just go back to datek and learn how to be a expert swing trader to eat those $21 fees *grin*

Just open a universal account at IB and trade futures. They'll give you $100,000 to trade with for every 5K you have, and you can become rich or poor real fast!

 

[def]

forget about T+1 cash settlement. I might be wrong but you have to get the counter-party to agree. either way it is not worth the extra cost, time or effort. I suggest you consider upgrading your account to trade futures. Single Stock futures start Nov. 8. In a commodity account they will be subject to the PDT rules and you'll get higher leverage than a cash account.

 

[LA ECHO]

Originally posted by CarlErikson


Assuming what you say is the correct way to think about this issue, then what about the following:

Suppose I have X dollars in a margin account and I buy X dollars of a stock and then I sell X dollars of that stock. Then I do this again 9 more times. Why do I not need to pay debit interest for my trading on that day? Didn't I have to borrow money (9X) in order to do my last 9 round trips? If not, why not? If I didn't borrow money, then why can't I do this in a cash account (especially if the brokerage requires the cash to be in the account before purchase, i.e., like IB)?Carl

The settlement of all those transactions is going to happen at the same time. So your broker may choose to allow you to do that based on the fact that they know and can monitor what your balance(equity) will be at settlement. If they did that they are essentially doing you a favor. If the net result of 10 day trades is an increase in equity of $200 then even if it took an aggregate of $1M ($1M in proceeds, $999,800 in purchases), your firm does not have to technically transfer any money out untill T+3, at which time it gets the same amount +$200 transferred in. So because all trades clear at the same time, there is no money loaned.

 

[LA ECHO]

Originally posted by def
forget about T+1 cash settlement. I might be wrong but you have to get the counter-party to agree. either way it is not worth the extra cost, time or effort. I suggest you consider upgrading your account to trade futures. Single Stock futures start Nov. 8. In a commodity account they will be subject to the PDT rules and you'll get higher leverage than a cash account.

You do need to get the other party to agree to T+1. On most brokers order entry platform ( I mean a full service broker whose platform is essetially like an order ticket) there is an area to specify special settlement terms.