Reg T

stock777 · May 16, 2005

Wasn't this already the case?
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The Federal Reserve recently clarified Regulation T, which has required that customers trading in cash accounts make full cash payment for each separate purchase. Under the new interpretive guidance, full cash payment has been strictly defined to exclude the proceeds derived from an unsettled transaction.

This will mean that you will have to wait for a sell transaction to fully settle (typically 3 business days) before you can make a purchase using those funds.

nkhoi · May 16, 2005

that was what I understand when I took series 7 (failed)

JackR · May 16, 2005

It must have been ambiguous. In the past, in my IRA account (cash account), when I sold a stock I had for a week, say for $5K, I could buy something else the same day using the proceeds from the sale. However, if I got very lucky and the stock moved 20 percent the day I bought it and I sold $1K worth, I could not use that $1K until settlement three days later.

As I interpret the news above, the same $5K would not be available for three days (settlement).

Perhaps different brokers/clearing houses were handling it differently and the rule was clarified.

avadon · May 17, 2005

Use an overseas brokerage so that you get instant settlement on every trade (no sec & nasd regulation). Just make sure you have the discipline to not overtrade it though.

mustang · May 17, 2005

That is why I would like to see Reg T go away and have everything settle next day!

Sparohok · May 17, 2005

Quote from stock777:

The Federal Reserve recently clarified Regulation T, which has required that customers trading in cash accounts make full cash payment for each separate purchase. Under the new interpretive guidance, full cash payment has been strictly defined to exclude the proceeds derived from an unsettled transaction.

You got this from an email from BrownCo, right?

This is a blatant lie. If you email them back and call them on their bullshit, they will sheepishly admit that the Fed did no such thing, Reg T policy is unchanged, and they are changing their own house policy only because their software isn't sophisticated enough to detect free riding violations correctly.

The actual Fed policy is that you can buy with unsettled funds in a cash account, but if you do, you cannot sell those shares until the original sale settles in 3 days. This is correctly implemented by several brokers including ScottTrade and Fidelity.

Martin

Bowgett · May 17, 2005

This is correctly implemented by several brokers including ScottTrade and Fidelity.

Martin [/B]

You are wrong about Fidelity. They will not stop you from free riding. My account was restricted for some time after I accidently did it. So be careful with Fidelity. Check you orders before you submit them. They will not stop you from free riding but they will restrict your account later

Sparohok · May 17, 2005

Quote from Bowgett:

You are wrong about Fidelity.

OK. I don't have an account with them, I was reporting what I had heard. In any case, the point is that they do not prevent you from trading with unsettled funds in a cash account. That contradicts BrownCo's claim of new stricter Reg T guidelines.

Martin

atlantafarmer · Jun 2, 2005

Well, only in America!

We have to wait 3 days to have the trades settled.

T+1 is the WORLD STANDARD now even in poorer countries like China and India.

Time to change to better SERVE customers!