Interest on Debit trades

[GotherL]

My bank allows me to borrow up to 1x without a margin account but requires that I do my contribution within 3 days unless I want to pay 21% interest which is crazy. Does anyone have a similar bank that does this and know if selling the securities within the timeframe works or not as I don't wanna end up forking 21% interest.

I already asked them and they gave me a generic answer as always.

"It is important to note that you must take the necessary steps to ensure that there is sufficient cash in your account to cover your order at the time of settlement in order to avoid any possible debit interest charges and/or sell out."

It is not clear whether selling the security rather than depositing said amount would allow me to bypass the interest charges.

 

[DirectMarketAccess]

Never understood how people deal with stuff like with this in regards to margin accounts. Just open a futures account. Most firms are around 4x with no additional cost or interest payments. On top of that, you don't have to deal with the pattern day trading rules either.

 

[GotherL]

Never understood how people deal with stuff like with this in regards to margin accounts. Just open a futures account. Most firms are around 4x with no additional cost or interest payments. On top of that, you don't have to deal with the pattern day trading rules either.

I am from Canada so I never did have to deal with ptd rules. I am planning to change brokers soon as my bank doesn't even allow me to short. The only reason I am using them is they don't have a minimum requirement to open.

 

[DirectMarketAccess]

I am from Canada so I never did have to deal with ptd rules.

Ah, lucky!

 

[jj90]

Canada has PDT rules too.

 

[Metamega]

:/ we don't have any PDT rules in Canada. Perhaps some U.S brokers have rules because of the way they clear but anyone I've seen with a shop setup in Canada doesn't have a PDT rule.

My bank for instance will allow me to trade with unsettled funds in my registered account( cash only) which I believe in U.S is illegal and called front running I do believe.

 

[DirectMarketAccess]

You can trade futures in US, without breaking the law.

 

[Lee-]

My bank allows me to borrow up to 1x without a margin account but requires that I do my contribution within 3 days unless I want to pay 21% interest which is crazy. Does anyone have a similar bank that does this and know if selling the securities within the timeframe works or not as I don't wanna end up forking 21% interest.

I already asked them and they gave me a generic answer as always.

"It is important to note that you must take the necessary steps to ensure that there is sufficient cash in your account to cover your order at the time of settlement in order to avoid any possible debit interest charges and/or sell out."

It is not clear whether selling the security rather than depositing said amount would allow me to bypass the interest charges.

I'm not 100% sure this is correct, but I'm providing you with what would seem logical to me.

I don't know what you mean by "debit trades", but US equities settle 3 days after the trade. I suspect your bank wants the deposit on or before settlement date of the opening position. If you close the position on the same date, then both the opening and closing positions would settle on the same date and as such I would expect you would not have to deposit that money (or be charged the interest). If you were to close the position the following day, then you would have settlement of the closing position 1 day after settlement of the opening position and I would expect that this would expose you to their interest charge for that 1 day.

 

[jj90]

Canada has PDT rules if you trade US equities. Canadian accounts not trading US equities have no such rules.

Props have a way around it due to structure and setup. Retail does not.

@OP: Switch brokers Immediately.

 

[GotherL]

If you were to close the position the following day, then you would have settlement of the closing position 1 day after settlement of the opening position and I would expect that this would expose you to their interest charge for that 1 day.

Nope, I think that's not how it works... My bank told me if I paid within the tradedate plus 3 business days I won't be charged interest at all. But if I don't have money after the 3rd day then they will charge me a hefty 21% interest.