New way to avoid Pattern Day Trader PDT rules

[chris500]

I don't trade equities, so I'm not one hundred percent sure this is new information for equities traders, but I just thought I would share this to help out all the new traders out there who can't come up with $25k.

PDT rules only apply to margin accounts. If you have a cash account you can trade as much as you want ONLY if you do same-day settlement (T+0). The problem is that everybody does 2-day T+2 settlement.

Except, this place:

https://www.ustocktrade.com/

It looks like it's a dark pool for retail traders. Only limitation is that maximum trade size is $10k. But, there is no limit on number of trades. I think they do this to make the fee structure a very simple 1 dollar per 10k.


This is the quote from their FAQ:

As the first retail stock trading network, Ustocktrade operates as an ATS that allows users to directly trade with each other. A 10,000 share and $10,000 order value limit on each buy or sell order ensures that users in the network are the types of “retail investor” Ustocktrade is aimed at.

This limit is per order only, not for your total buy or sell order value per day.

 

[Sig]

I don't trade equities, so I'm not one hundred percent sure this is new information for equities traders, but I just thought I would share this to help out all the new traders out there who can't come up with $25k.

PDT rules only apply to margin accounts. If you have a cash account you can trade as much as you want ONLY if you do same-day settlement (T+0). The problem is that everybody does 2-day T+2 settlement.

Except, this place:

https://www.ustocktrade.com/

It looks like it's a dark pool for retail traders. Only limitation is that maximum trade size is $10k. But, there is no limit on number of trades. I think they do this to make the fee structure a very simple 1 dollar per 10k.


This is the quote from their FAQ:

As the first retail stock trading network, Ustocktrade operates as an ATS that allows users to directly trade with each other. A 10,000 share and $10,000 order value limit on each buy or sell order ensures that users in the network are the types of “retail investor” Ustocktrade is aimed at.

This limit is per order only, not for your total buy or sell order value per day.

So you need someone on their ATS (of the "retail investor type") to happen to want to sell the same stock at the same time as you do? Maybe work for about the top 10 most liquid stocks, otherwise there's not going to be any liquidity. Ever try to trade a SSO, I imagine it will be like that. Might be fun to pick off the kind of people who would be naive enough to use something like this though.

 

[chris500]

So you need someone on their ATS (of the "retail investor type") to happen to want to sell the same stock at the same time as you do? Maybe work for about the top 10 most liquid stocks, otherwise there's not going to be any liquidity. Ever try to trade a SSO, I imagine it will be like that. Might be fun to pick off the kind of people who would be naive enough to use something like this though.

There's market makers (they call them "super users") providing liquidity:

https://www.ustocktrade.com/customer-account-agreement


Quote:

In addition to other customers like Me, the Trading System
is also available to “super users,” which are broker dealers that satisfy
minimum capital requirements and that provide liquidity in securities
traded through the Trading System. Super users have the right but not
the obligation to fill marketable customer orders (i.e., customer orders at
or between the NBBO), if such orders cannot be matched with other
customer orders. However, super users’ capital, while substantial, is
limited and they may be unable or unwilling, for financial reasons, to take
the contra side of customer orders. Similarly, super users may not be
able or willing to fill marketable customer orders in volatile or thinly
traded markets or in other difficult market conditions. As such, super
users are not guarantors of liquidity or trade execution. As noted above,
the internal-only trade fulfillment nature of the Trading System means
that My orders may not be executed or executed on a timely basis. I
understand that Ustocktrade Securities, through its proprietary account,
is currently the only broker dealer acting in the capacity of super user on
the Trading System, and that other broker dealers may be approved as
super users in the future without notice to me. Super users are permitted
to trade on margin and, as customers of Ustocktrade Securities, are able
to enter orders with Ustocktrade Securities to trade for their own
accounts and cover their positions in the market, including positions
taken as a result of functioning as super users. Super users are not
charged trading fees by Ustocktrade Securities for trade executions on
the Trading System but do pay the costs of executing orders on other
exchanges.

 

[Sig]

There's market makers (they call them "super users") providing liquidity:

https://www.ustocktrade.com/customer-account-agreement


Quote:

In addition to other customers like Me, the Trading System
is also available to “super users,” which are broker dealers that satisfy
minimum capital requirements and that provide liquidity in securities
traded through the Trading System. Super users have the right but not
the obligation to fill marketable customer orders (i.e., customer orders at
or between the NBBO), if such orders cannot be matched with other
customer orders. However, super users’ capital, while substantial, is
limited and they may be unable or unwilling, for financial reasons, to take
the contra side of customer orders. Similarly, super users may not be
able or willing to fill marketable customer orders in volatile or thinly
traded markets or in other difficult market conditions. As such, super
users are not guarantors of liquidity or trade execution. As noted above,
the internal-only trade fulfillment nature of the Trading System means
that My orders may not be executed or executed on a timely basis. I
understand that Ustocktrade Securities, through its proprietary account,
is currently the only broker dealer acting in the capacity of super user on
the Trading System, and that other broker dealers may be approved as
super users in the future without notice to me. Super users are permitted
to trade on margin and, as customers of Ustocktrade Securities, are able
to enter orders with Ustocktrade Securities to trade for their own
accounts and cover their positions in the market, including positions
taken as a result of functioning as super users. Super users are not
charged trading fees by Ustocktrade Securities for trade executions on
the Trading System but do pay the costs of executing orders on other
exchanges.

Well there goes the last part of my idea, already professionals signed up to pick off the suckers.

It's hard to see how you end up with anything but poor execution when you limit yourself to one ATS that currently has 0% of the world's trading volume.

 

[chris500]

Well there goes the last part of my idea, already professionals signed up to pick off the suckers.

It's hard to see how you end up with anything but poor execution when you limit yourself to one ATS that currently has 0% of the world's trading volume.

Like I said, I don't trade equities, but isn't the biggest advantage of a dark pool the fact that you can get executed at the midpoint price? I remember reading about the operations of one particular dark pool and the number was something like 2/3rds of the trades were executed at the midpoint price.

Can anybody who regularly trades at dark pools shed a light on midpoint price execution?

 

[Sig]

Like I said, I don't trade equities, but isn't the biggest advantage of a dark pool the fact that you can get executed at the midpoint price? I remember reading about the operations of one particular dark pool and the number was something like 2/3rds of the trades were executed at the midpoint price.

Can anybody who regularly trades at dark pools shed a light on midpoint price execution?

You can get midpoint execution anywhere. The more execution venues that you can shop your order the better price you'll get, that's a basic markets concepts that's existed since souks in medieval times. The fact that you're trading on a dark pool isn't what gets you better execution, it's the fact that you can trade with many venues and the resultant competition drives down spreads. It's not some kind of esoteric science, just markets.

 

[chris500]

You can get midpoint execution anywhere. The more execution venues that you can shop your order the better price you'll get, that's a basic markets concepts that's existed since souks in medieval times. The fact that you're trading on a dark pool isn't what gets you better execution, it's the fact that you can trade with many venues and the resultant competition drives down spreads. It's not some kind of esoteric science, just markets.

No, you can't get midpoint execution at lit exchanges. If you send a limit order at the midpoint price then that becomes the new NBBO, therefore it is not the midpoint of the NBBO.

You can send a midpoint of the NBBO limit order to a dark pool and the limit order will not change the NBBO. That's the whole point. Your order is "dark", not lit.

 

[Sig]

No, you can't get midpoint execution at lit exchanges. If you send a limit order at the midpoint price then that becomes the new NBBO, therefore it is not the midpoint of the NBBO.

You can send a midpoint of the NBBO limit order to a dark pool and the limit order will not change the NBBO. That's the whole point. Your order is "dark", not lit.

Well if you want to have an entirely different conversation about an entirely different thing than we certainly can. It now appears that you're concerned not about obtaining a price that was half-way between the NBBO at the time you entered it, but in ensuring that you can execute volume without alerting the market. If you cared about that and good execution you wouldn't limit yourself to just one ATS, let alone this ATS which is specifically aimed at tiny volume!

Listen, you've got an interesting idea here and I wish you luck in attracting volume to your exchange. As a fellow entrepreneur who has also started an exchange, I realize how hard it is to attract volume and how valuable the increasing returns to adoption are once you do. Just don't get distracted and don't try to BS people. I think everyone would respect you more if you admitted that yes, you may not always get the best execution but if it's your only option to avoid the PDT rule it may be worth it for you.

 

[d08]

Like I said, I don't trade equities, but isn't the biggest advantage of a dark pool the fact that you can get executed at the midpoint price? I remember reading about the operations of one particular dark pool and the number was something like 2/3rds of the trades were executed at the midpoint price.

Can anybody who regularly trades at dark pools shed a light on midpoint price execution?

Perhaps I'm wrong but I always thought the point of dark pools is to execute massive size relative to current liquidity without being noticed. Algos to get better prices compared to out-in-the-open orders just sitting around, they don't need to be in dark pools necessarily.

This ustocktrade is just designed to take advantage of suckers as Sig mentioned. I'm not convinced people should be trading $2000 positions, to make any kind of return the risk would be enormous. But let the gamblers gamble.

 

[Turveyd]

PDT rule ruined me when it first came out, 15years ago, profitable full time day trader sub 25k to having to work again, sucks.

Interesting everyone over 25k used the 4:1 intraday margin and dropped sub 25k pretty quickly despite doing well on 2:1 for years before, and once sub 25k moved to high risk options and blew account me included

Tell me again how its to protect retail traders

Margin reduced to 30:1 soon i fear