Pattern Daytrading poll

8. Can you give an example on what goal the PDT rule achieve?
A: Today (Dec 17, 2002) is a perfect example to show what the special interest group want to achieve by imposing the PDT rule. The rule just eliminate most ability of small investors to stop loss (and lock in gain) in a volatile day. This makes the job of manipulators easier. As for non-day trades, manipulators can run massive sophisticated programs over night in order to rip of maximum profit.

:p


Quote from qdz:

7. How many days did NASD ask public opinions on the PDT rule proposal?
A: Less than a week.
More...
 
9. Has NASD expressed their regret for the mistake of PDT rule?
A: No. In fact, they believe it is very effective in term of achieving its untold goals. More exposure to the public of the truth may pressure them. Therefore, your effort to protest is absolutely necessary. Write and talk to your politicians and organizations. We can turn this around.

:p

Quote from qdz:

8. Can you give an example on what goal the PDT rule achieve?
A: Today (Dec 17, 2002) is a perfect example to show what the special interest group want to achieve by imposing the PDT rule. The rule just eliminate most ability of small investors to stop loss (and lock in gain) in a volatile day. This makes the job of manipulators easier. As for non-day trades, manipulators can run massive sophisticated programs over night in order to rip of maximum profit.

:p
More...
 
Quote from hii a_ooiioo_a:

The NASD FAQ which IB refers you to merely says "$25,000 minimum equity". IB chooses to take the strictest interpretation of rules, so they require $25,000 equity with margin value.

IB does not count the value of stock options toward the $25,000. I don't think they count the value of nonmarginable stocks either.

When you sell your options, and the Equity With Margin Value goes back over $25,000, the daytrade counter will say "Daytrades Left: Unlimited".
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wow, a day trading counter....

what has this market come to?
 
Yes, another piece of your information allows manipulators to monitor. You could easily be ripped off.

:p


Quote from Stone's Throw:



wow, a day trading counter....

what has this market come to?
More...
 
10. Where is the NASD version of FAQ on PDT rules?

A:

http://www.nasdr.com/day_trade_margin.asp

from where you will find the stories that NASD dares to tell the public. Nevertheless, NASD is not shameless enough to claim that PDT rules protect investors.

Quote from qdz:

9. Has NASD expressed their regret for the mistake of PDT rule?
A: No. In fact, they believe it is very effective in term of achieving its untold goals. More exposure to the public of the truth may pressure them. Therefore, your effort to protest is absolutely necessary. Write and talk to your politicians and organizations. We can turn this around.

:p
More...
 
Quote from hii a_ooiioo_a:

The NASD FAQ which IB refers you to merely says "$25,000 minimum equity". IB chooses to take the strictest interpretation of rules, so they require $25,000 equity with margin value.

IB does not count the value of stock options toward the $25,000. I don't think they count the value of nonmarginable stocks either.

When you sell your options, and the Equity With Margin Value goes back over $25,000, the daytrade counter will say "Daytrades Left: Unlimited".
More...

Hii:

It doesn't matter what IB thinks. As a member of the NYSE it must enforce the rules by how the NYSE thinks. Perhaps you should contact the NYSE for further clarification.

The NYSE rule reads as follows:

“Except as provided below, and in the case of a put, call, index stock group option, or stock index warrant with a remaining period to expiration exceeding 9 months, no put, call, currency warrant, currency index warrant or stock index warrant carried for a customer shall be considered of any value for the purpose of computing the margin to be maintained in the account of such customer.”
 
I understand that options are not marginable and that they don't count toward the account's margin value.

The question was about whether the options' value would count toward the $25,000 minimum equity required by the NASD rule for "pattern daytraders". In the NASD link which is provided on the IB FAQ as the answer to the Daytrading rules, it states that a pattern daytrader account must have $25,000 minimum equity. The NASD FAQ does not state that the account equity must be marginable, merely that the account must have $25,000 equity. Nonmarginable equity could still be counted toward the $25,000 without contradicting the NASD rule as written on the NASD website.

Equity without margin value is still equity.

The NASD rule reads as follows:

Under the rules, a pattern day trader must maintain minimum equity of $25,000 on any day that the customer day trades. The required minimum equity must be in the account prior to any day-trading activities. If the account falls below the $25,000 requirement, the pattern day trader will not be permitted to day trade until the account is restored to the $25,000 minimum equity level.
www.nasdr.com/day_trade_margin.asp
 
You're quoting a NYSE rule addressing margin maintenance. We're discussing the pattern daytrader minimum account equity definitions. It's understood that in a $25,000 account any calls or puts detract from the marginable value of the account. The daytrader rules however do not specify that the $25,000 minimum equity in the account must be marginable.

Example: If I have a $30,000 account, all in cash or marginable securities, my daytrade buying power is $120,000. (4 x $30,000)

If I have a $30,000 account, and $15,000 of that account are in options, I cannot daytrade $120,000. Daytrade buying power would only be $60,000. (4 x $15,000 marginable equity).

But the account still meets the $25,000 minimum equity required to engage in daytrading. Both in the wording of the NASD rule and the NYSE rule, which are identical.
 
Hii.

Our attorney's who have discussed this matter with the various regulators were told otherwise (the option positions can not be used as equity).

No doubt it is a stupid rule, yet we must implement it to the NYSE's satisfaction.
 
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