IB cash accounts...
- Thread starter Yoda
- Start date
Yoda,
Regulation T allows "daytrades"(purchasing and selling of the same security on the same day) in a cash account, provided that you have the funds before each purchase.
Regulation T does NOT prohibit daytrading in a cash account in all cases. That is, regulation T allows hundreds of "daytrades" to be made in a cash account, provided that
there are sufficient funds in the account prior to each purchase.
Therefore, every self clearing and realtime (buying power) updating broker can offer multiple "daytrades" in a cash account. imo
Daytrading is defined as an activity in a MARGIN account, therefore NO activity in a cash account is considered daytrading. Hence "daytrading in a cash account" is an oxymoron.
By "daytrading in a cash account" previous posters obviously mean multiple daytrades in a cash account. For example a typical question is: "Can I daytrade 1000 shares of CSCO in my 20k cash account?" by that it's usualy meant:
"Can I buy and sell subsequently 1000 shares of CSCO twenty times in a day in a 20k cash account" Yes, regulation T allows that (under certain conditions imo).
Here's what Regulation T states:
Regulation T
Section 220.8 Cash account.
(a) Permissible transactions. In a cash account, a creditor, may:
(1) Buy for or sell to any customer any security or other asset if:
(i) There are sufficient funds in the account; or
(ii) The creditor accepts in good faith the customer's agreement that the customer will promptly make full cash payment for the security or asset before selling it and does not contemplate selling it prior to making such payment;
Hence, in layman terms: Can we "daytrade in a cash account"?Yes, if the broker is self clearing and realtime updating.
Anyone who claims the opposite must show which part of regulation T prohibits daytrading in a cash account, there's no such part imo. But obviously to claim that, one has to at least read Regulation T, not just repeat like a parrot not always valid conclusions imo.
Those brokers, which refuse to allow multiple daytrades in a cash account will probably loose their <25k daytrading customers to those that do.
Fohat
___________________________________________
Read the rule so you don't look like a fool.
Regulation T: http://www.bankersonline.com/regs/220/220.html
Regulation T allows "daytrades"(purchasing and selling of the same security on the same day) in a cash account, provided that you have the funds before each purchase.
Regulation T does NOT prohibit daytrading in a cash account in all cases. That is, regulation T allows hundreds of "daytrades" to be made in a cash account, provided that
there are sufficient funds in the account prior to each purchase.
Therefore, every self clearing and realtime (buying power) updating broker can offer multiple "daytrades" in a cash account. imo
Daytrading is defined as an activity in a MARGIN account, therefore NO activity in a cash account is considered daytrading. Hence "daytrading in a cash account" is an oxymoron.
By "daytrading in a cash account" previous posters obviously mean multiple daytrades in a cash account. For example a typical question is: "Can I daytrade 1000 shares of CSCO in my 20k cash account?" by that it's usualy meant:
"Can I buy and sell subsequently 1000 shares of CSCO twenty times in a day in a 20k cash account" Yes, regulation T allows that (under certain conditions imo).
Here's what Regulation T states:
Regulation T
Section 220.8 Cash account.
(a) Permissible transactions. In a cash account, a creditor, may:
(1) Buy for or sell to any customer any security or other asset if:
(i) There are sufficient funds in the account; or
(ii) The creditor accepts in good faith the customer's agreement that the customer will promptly make full cash payment for the security or asset before selling it and does not contemplate selling it prior to making such payment;
Hence, in layman terms: Can we "daytrade in a cash account"?Yes, if the broker is self clearing and realtime updating.
Anyone who claims the opposite must show which part of regulation T prohibits daytrading in a cash account, there's no such part imo. But obviously to claim that, one has to at least read Regulation T, not just repeat like a parrot not always valid conclusions imo.
Those brokers, which refuse to allow multiple daytrades in a cash account will probably loose their <25k daytrading customers to those that do.
Fohat
___________________________________________
Read the rule so you don't look like a fool.
Regulation T: http://www.bankersonline.com/regs/220/220.html
def
Sponsor
Fohat,
I'm afraid this is the problem:
(ii) The creditor accepts in good faith the customer's agreement that the customer will promptly make full cash payment for the security or asset before selling it and does not contemplate selling it prior to making such payment;
IB is going to stop allowing cash to be utilized until settlement (i.e. you will only be allowed to trade on settled cash). However, if sufficient cash is in the account there are no restrictions on day trading.
I'm afraid this is the problem:
(ii) The creditor accepts in good faith the customer's agreement that the customer will promptly make full cash payment for the security or asset before selling it and does not contemplate selling it prior to making such payment;
IB is going to stop allowing cash to be utilized until settlement (i.e. you will only be allowed to trade on settled cash). However, if sufficient cash is in the account there are no restrictions on day trading.
Speaking for my under-capitalized self, if I'm not allowed to daytrade with a cash account because of clearing issues, I may have no choice but to swingtrade. Since I switched to I.B. from Datek, I've actually been profitable trading 100 share lots for as little as .12 scalp or more, 25-30 roundtrips per day without getting burnt by commissions. I.B. has been my savior. And low stock prices. I guess what I'm saying is this: new daytrading rules, not being able to short, cash account stipulations, etc., treading water with sharks circling and buzzards over-head... I think I'm toast. No offense to swingtraders but it's just not the same. Any guidance would be greatly appreciated.
Sincerely,
BRONKS
Sincerely,
BRONKS
Sorry, I have a clarification question:
Usually, brokers with a tight interpretation of reg T will allow you to trade "through your net worth" once per day and brokers with a loose interpretation will immediatley release buying power so that you can buy and sell all day. Will IB be implementing this type of system? Or will I have to wait three days before being allowed to trade again?
I know IB only follows the rules, and is in fact very vocal when it comes to opposing stupid regulations, so don't be offended that I say how completely idiotic I think this whole thing is.
Usually, brokers with a tight interpretation of reg T will allow you to trade "through your net worth" once per day and brokers with a loose interpretation will immediatley release buying power so that you can buy and sell all day. Will IB be implementing this type of system? Or will I have to wait three days before being allowed to trade again?
I know IB only follows the rules, and is in fact very vocal when it comes to opposing stupid regulations, so don't be offended that I say how completely idiotic I think this whole thing is.
def
Sponsor
unfortunately from what I've read internally it seems your funds will be locked up until settlement. I'm not 100% positive but that looks to be the case. My read on the situation is that a cash account will be treated purely as a cash account. Since IB systems are capable of T+0 settlement I'll bring up the suggestion to see if there is a legal way to settle a cash account faster than T+3. (I wouldn't be too optimistic about this because the counterparty of any transaction is most likely not IB).