The problem with this "logic" is that brokers have always been able to place limits on minimum account sizes, and adjust commissions and minimum margin requirements as they see fit. If they wanted to fire or prevent small accounts, occams razor you just either don't allow them at your brokerage or make it so costly it either covers the pain they cause you or drives them away. Why in the world would you go for a complex regulatory solution which requires a compliance burden on your part when you could unilaterally implement something that has the exact same effect?
The PDT rule is holding me back. And it makes no sense.
- Thread starter Risepoint1879
- Start date
But then who wants to be the brokerage that refuses accounts/ Let's remember this was enacted during the still highly competitive early days of the discount stock broker - there must have been 12 to 15 brokers advertising to be the lowest cost broker for the small investor on CNBC. Very few are left today. Back when PDT was implemented, there was an industry-wide interest in making this a regulatory requirement rather than an individual corporate business decision.
If this were true ... but it is not. If you have an income that allows you to save low five figures annually, you are not "average."
That makes no sense. If you don't want those kind of customers you don't want those kind of customers, it matters not at all to you if your competitors take them if you don't want them. In fact, it would please you if your competitors took them because they they'd be weighed down by them, if your premise is that these customers cost more than they were worth.
Companies fire customers all the time, in fact there's a somewhat famous b-school case study about a large cell phone company that set up their automated phone system to place customers who cost the company more in support than they were worth on hold for long periods of time each time they called in an effort to compel them to either switch to another company or stop wasting agent's time on the phone.
PDT rule makes sense for two reasons - the obvious one of limiting activity and a @Sig pointed out - it gives the broker cover. "I'd allow it, but the regulators won't let me." If the broker's didn't want it they would have been more aggressive during the comment period - back when it was deployed.
No one is asking you to agree with me. I can't say that what I suspect is the true reason for the PDT rule coming to be. I suspect strongly that my reasoning is correct.
You fail to distinguish between a company firing an unruly customer versus a company dismissing an entire class of customer. I do not have the time to spell it out for you any further. This is not a competition. If you must be right, rest assured, you are.
@Sig is not the one making that argument. He refutes that argument.
No, as I mentioned they actually taught us how to fire an entire class of unprofitable customers in business school. It's a thing in the business world for sure, and I'm sure the all those brokers had folks that came from the same background and probably read the same case since the HBS cases get used at most B-schools. That case specifically dealt with the class of customers who's customer service load exceeds their profit potential. That's actually a much harder class to identify and fire selectively than a broker simply setting a minimum account size or setting a commission schedule. No competition here, it's just the way a good chunk of the world thinks based on a common educational background. Most folks would be happy to have such insights, I'd certainly like an insight into how your industry, whatever it is, thinks about things that I'm interested in. If you're not interested, no worries, go back to whatever it was you were doing.
Do not assume PDT trading is very very simple and easy.
Not many people can be PDT trader.
Your money in the account (if you manage to open an account)
will be wiped out very quickly.
PDT rule makes great sense.
Do other types of trading first.
then when your account grow, go open a PDT account.
Not many people can be PDT trader.
Your money in the account (if you manage to open an account)
will be wiped out very quickly.
PDT rule makes great sense.
Do other types of trading first.
then when your account grow, go open a PDT account.