I wanted to know the chances of ever having a pattern daytrader rule for the emini futures? Does anyone think that this would be something that they would pass in the future seeing how a lot of traders are switching over to emini futures? I certainly hope not but I wouldn't put it past them. This could go for the Forex market as well. In my opinion it is my money I should be able to do with it what I want. Any thoughts on this or has it ever crossed anyone's mind? Thanks.
Pattern Daytrade Rule
- Thread starter traderdave72
- Start date
As more mainstream brokerages offer futures products, I think it becomes more likely the Fed will step in with regulations. The tipping point, imo, will be Joe Sixpac "investors" (thanks to the mainstream brokerages)who have no business in the futures arena, laying blame for losses. I'm waiting for the headline... "224,000 pounds of sugar delivered to newly retired diabetic couple"
As to what kind of regulation, I have no idea. As Nazz points out, exchanges can decrease leverage at any time. But that has nothing to do with tax rates given to futures traders or account opening requirements.
Ultimately, fortunately not in the immediate, I think some fed regulation will occur. We've seen it with PDT, and in the news now, hedgefunds and mortgages. Politicians leveling the field and looking out for the well-being of constituents. ya right.
Osorico
The current PDT rule came into effect in 2001, right around the last bubble burst. I don't think futures are quite there yet, but you can see it coming.
Goes to show, make all the money you can in this racket while the rules continue to favor it.
Goes to show, make all the money you can in this racket while the rules continue to favor it.
I think never.
I think that because, unlike stocks, there is always the disclaimer that"futures trading carries a significant risk of loss." Every brokerages requires you to sign a disclosure document which details this significant risk and that you understand it. (CFTC rule 1.55c)
Plus, every Futures exchange's printed literature has a brief description of this disclosure statement.
This industry has pretty much indemnified itself against scenarios which would bring small investor protection.
Matter of fact, there is no SIPC equivalent in futures. That pretty much says it all as far as risk is concerned.
Futures are de facto high risk. Unlike the common understanding of stocks which one can buy and hold. Nothing further need be or can done to protect pikers, gamblers, and noobs (aka joe six pack)
I think that because, unlike stocks, there is always the disclaimer that"futures trading carries a significant risk of loss." Every brokerages requires you to sign a disclosure document which details this significant risk and that you understand it. (CFTC rule 1.55c)
Plus, every Futures exchange's printed literature has a brief description of this disclosure statement.
This industry has pretty much indemnified itself against scenarios which would bring small investor protection.
Matter of fact, there is no SIPC equivalent in futures. That pretty much says it all as far as risk is concerned.
Futures are de facto high risk. Unlike the common understanding of stocks which one can buy and hold. Nothing further need be or can done to protect pikers, gamblers, and noobs (aka joe six pack)
Are you kidding me? Chicago and Illinois have enough political influence to keep that from ever happening.
You make some good points regarding the futures industry ddunbar. But the last sentence of your post "nothing further need be or can be done to protect" remains to be seen, imo.
Since the beginning of time (at least as far as Im concerned) the security industry has had numerous disclosures and regulations ranging from the timing and wording of syndicate tombstone marketing, all the way to disclosure and lack of guarantee for the most mundane money market vehicle.
Don't get me wrong, Im not a pessimist on the futures industry. Far from it. I love my "job"! But none of your points, looking forward, remove the government from the equation.
Just a brief history lesson...
SIPC was created in 1970 by Congress, as "protection" for securities investors against broker/dealers defaulting. Hmmm, that was the middle to the end of the "go-go" era.
In 2001 PDT was enacted by the SEC and NASD... Protection FOR broker/dealers against customer defaults, post-bubble.
2007... Congress determines hedgefund investors must be protected from themselves and proposes net-worth requirements more than double existing requirements. Protection for whom??
2007... Congress "evaluates" potential bail-out of mortgage malaise. At the same time turns it's head at the issuance of credit to illegal aliens.
I do think that at some point in the future, the futures industry will become targeted, whether it be on taxes to level the playing field, for further protection of broker/dealers, for protection of traders/investors from themselves, or any combination of.
Like I said, I hope not... I love my "job", but.
Osorico
PDT rules were enacted because of suitability concerns (for the public), compliance concerns (specifically at daytrading firms), and the theoretical excess volatility that day traders were creating in certain stocks.
They weren't enacted to protect NASD member firms from customer default because most firms already had measures in place to protect themselves on that front.
For futures, the unofficial suitability test is having a liquid net worth of $50,000. Many would be traders obviously lie on the account app and there's no feasible way to check. The good news is, if they lie and wish to arbitrate on thegrounds of suitability, their case would be moot.
Anyway, all that aside, laws, specifically protective ones, are generally enacted to protect...
THE STUPID.
In other words, the general public.
Raisng the barrier to hedge fund investing? Yep. Because some money manager or even the client could suggest placing an entire nest egg into a hedge fund for the intermediate term under the assumption that it'll outperform a standard blue chip or S&P 500 index fund. And the disclosure of risk will probably not be adequate especially in the face of greed.
The beauty of futures trading is that only a very small percent of the "general public" engages in it. It's still predominately a pro's game. A future's limited life might account for that. There are no viable buy and hold strategies as there are with stocks. futures requires practically your fullest attention.
In spite of the fact that there are futures commission merchants offering $500 daytrade perf bonds for say eminis, the zero sum nature of the futures game puts these pikers who take them up on the offer in the death throws rather quickly. That helps to make the futures market somewhat inherently self regulating.
It's not for pikers or the general public who needs protection from themselves. It's for professional traders. And it carries that stigma in the minds of the public. All of which should keep futures safe from "liberal" types of legislation on the order of gun control laws.
They weren't enacted to protect NASD member firms from customer default because most firms already had measures in place to protect themselves on that front.
For futures, the unofficial suitability test is having a liquid net worth of $50,000. Many would be traders obviously lie on the account app and there's no feasible way to check. The good news is, if they lie and wish to arbitrate on thegrounds of suitability, their case would be moot.
Anyway, all that aside, laws, specifically protective ones, are generally enacted to protect...
THE STUPID.
In other words, the general public.
Raisng the barrier to hedge fund investing? Yep. Because some money manager or even the client could suggest placing an entire nest egg into a hedge fund for the intermediate term under the assumption that it'll outperform a standard blue chip or S&P 500 index fund. And the disclosure of risk will probably not be adequate especially in the face of greed.
The beauty of futures trading is that only a very small percent of the "general public" engages in it. It's still predominately a pro's game. A future's limited life might account for that. There are no viable buy and hold strategies as there are with stocks. futures requires practically your fullest attention.
In spite of the fact that there are futures commission merchants offering $500 daytrade perf bonds for say eminis, the zero sum nature of the futures game puts these pikers who take them up on the offer in the death throws rather quickly. That helps to make the futures market somewhat inherently self regulating.
It's not for pikers or the general public who needs protection from themselves. It's for professional traders. And it carries that stigma in the minds of the public. All of which should keep futures safe from "liberal" types of legislation on the order of gun control laws.
Good points again, ddunbar
As for the PDT rules, the reasons you cite can be viewed either way, protection for the general public or for the BDs. Actually it's probable it was a scapegoat set of rules to get get the compliance monkey off NASD and SEC shoulders at the time.
The wild-card, and you mention it, is the risk stigma in the minds of the public. Going back to my original thought, as more and more mass-marketed brokerages offer futures, the more likely this stigma diminishes, the more likely people who have no business in the arena lose money, the more likely feds step in.
I hope you are correct that futs are safe from legislation.
Good chatting with you
Osorico