some SEC people should go to jail for PDT (i'm only half joking)

G

Gordon Gekko

Re: PDT
from: http://www.elitetrader.com/ch/transcripts/ib_chat.cfm

Steve Sanders (Sep 11, 2003 4:37:37 PM)
It was the SEC who asked the exchanges to come up with some rules.

Steve Sanders (Sep 11, 2003 4:38:40 PM)
The original thought behind the rules was to keep small traders from hurting themselves.
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who the f*** is the government to dictate what i should do with my money???????!?!?!?!?

why doesn't our government stop wannabe actors from trying to become movie stars since the odds of success are so bad? (i'm being sarcastic)

as axeman has said in a chit chat thread, a republic respects the rights of the minority. this rule harms the minority that can trade to "help" the majority that can't. it's not right. i don't even trade stocks anymore but this s*** still PISSES ME OFF.
 
The PDT rule have some flexibility and as far as I have heard (I don't trade stock so I am not concerned by pdt rule it's just a statistical remark I will make below) IB is one of the less flexible so I am not convinced by IB excuse to put all the responsability on the SEC. And since the president of the SEC has been the lawyer of Wall Street before he was nominated I doubt that he more defends the small traders than the brokers interests :) . Above all it is well known statistically that the interest of casinos are to either limit the amount of total bet or requiring the highest capital possible so that it accentuates the probability of ruins of players. So the PDT is in fact accentuating the risk of ruin of small traders and are immobilising capital for others. As usual the brokers pretext to defend the clients interests whereas they defend themselves which is of course understandable. An other pretext advanced for PDT was that it accentuates volatility some academic researchers wanted to know if PDT rule was justified for that and have published an article showing the results of model simulation which demonstrates exactly the contrary and that it was above all the market makers that was controlling the vol and especially the spread. Again a complete fake and even lie has been given as pretext.

Now as for me daytrading stocks is not worth compared to futures so PDT rule is not really annoying.
 
PDT rule doesn't bother me, I just reply because I hate lies especially when it is about statistic law of risk of ruin :). If they really wanted to protect the traders they would only require an opening account of 25000$. Now the idea of protecting traders is stupid since in theory the market is supposed to discharge the risk on speculators so why the hypocrisis about protecting them ?

P.S.: since when Wall Street has a communist mentality about protecting the poors and the weaks is this a new trend then let me know :D.

Quote from bigbeech:

harrytrader and gekko going at it- this should be entertaining.....:D
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I thought his answer to this question was most telling:

resinate Doesn't the PDT hurt the NYSE too?

Steve Sanders Not if they believe that they get most of their business from the large trading firms and the small investor is just a nuisance.

That says volumes to me.

André
 
IB was very flexible on the PDT. I have in many occasions entered two positions with only one day trade left and stopped out but did not have my account frozen. Instead, I only waited five days until a three new trades were available. I have not traded stocks for about six months now, only futures, but I never had my account frozen. Sounds like IB had to tighten the rule. Just my 2 cents.
 
It seems to me that PDT rules do help people that are new. Generally if you are brand new to trading your going to start off with less than 25k. If you use a cash account you can daytrade all you want, but you have to keep your positions small so you can still trade everyday( 3 day settlement).

Such rules make people not take a 5% loss on there total account equity. For instance if you have a 10k account and break it up into $1000 lots, a 5% loss on any given trade is only half a percent of your total equity.
 
harry, i didn't realize that you were involved with the correspondence between IB the SEC and the NYSE. the guidance and thus interpretation of the rules in regards to IB's implementation of the rules comes from these discussions.

Now lets assume there is flexibility and you run a major international brokerage. Do you take the chance and have flexible rules or do you implement them as suggested by your regulators?
 
I can't find the archive of that article for the moment which is the pity because it really questionned PDT rule precisely, but in classical theory small traders should normally be used to add noise and avoid too much easy forecast of the market. And in a book "Neural Network for Economic and Financial Modelling" (Thomson Publishing 1996) - I bought at the time I was making my model research - there is several simulations of agents model, for example one with agents that learn and others that don't learn and when the number of agents that don't learn is small the market will be forecastable for the first category.

Quote from harrytrader:

An other pretext advanced for PDT was that it accentuates volatility some academic researchers wanted to know if PDT rule was justified for that and have published an article showing the results of model simulation which demonstrates exactly the contrary and that it was above all the market makers that was controlling the vol and especially the spread. Again a complete fake and even lie has been given as pretext.

Now as for me daytrading stocks is not worth compared to futures so PDT rule is not really annoying.
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Are you implying that the SEC want to help speculators to make money whereas in theory Speculators are supposed to endorse the risk of the market :D.

You are forgetting something: the money management rule of risking a small amount is relative to the REAL AVAILABLE MONEY that you can TOTALLY risk. With the PDT rule the real AVAILABILITY of money is NO MORE equal to the trading account. And so the PERCENTAGE OF EACH BET IS IN FACT HIGHER than the FACIAL (apparent) percentage that doesn't take into account this PDT rule and when this percentage is well over the supposed optimal f value of Money Management - which is unknown generally so that it worsens the scenario :) - the RISK OF BEING OUT OF THE GAME sooner or later (since you are not ruined OUT of the market because of PDT rule) is almost certain. That is the very reason why I said above that the risk of ruin (I should rather employ "being out of the game" in that case but mathematically from the point of game theory it is the risk of ruin) is in fact higher with PDT rules than without PDT rules. And casinos know that and so the stock market organisers. It is all the more vicious that many people will think that they are more secure !

Now nothing is totally negative or positive and one could find something positive in PDT rule, that it will avoid people that are not rich enough to speculate to be tempted by that. But then it was enough to just oblige a minimum trading account at opening or better say you cannot take more position than x% of your trading account EACH TIME (or on opened positions) in that case the SEC would help people to follow money management rule. If not and if people can't decide what they can do with their money in a supposedly free market then I don't know if we have real capitalism in this market :D.

Quote from t0yland:

It seems to me that PDT rules do help people that are new. Generally if you are brand new to trading your going to start off with less than 25k. If you use a cash account you can daytrade all you want, but you have to keep your positions small so you can still trade everyday( 3 day settlement).

Such rules make people not take a 5% loss on there total account equity. For instance if you have a 10k account and break it up into $1000 lots, a 5% loss on any given trade is only half a percent of your total equity.
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