Trading with yourself?

Sudso has no idea what he is talking about.

What an amateur.

But he did attend a party hosted by the cafeteria in the movie Wall Street.

When floor brokers execute a trade and it is blocked, they normally don't ask for account numbers until after the trading day is over.

If anyone knows what I am hinting at then you understand the legal/illegal implications. I can go over more details but sudso would not understand.

I still have some copies of order executions from my days at Merrill Lynch.

Alex L. Wasilewski
Co-Founder & Head Trader
Trades That Work
www.puretick.com
1-877-GOLONG1 (1-877-465-6641)
 
I think that taking both sides of the same trade violates the basic prohibitions against criminal market manipulation imposed by the Securities and Exchange Act of 1934, but I don't remember for sure, so maybe this would be a starting point for your research.

I think that the scheme for transferring funds into or out of a tax-advantaged retirement account would also be considered a criminal fraud or criminal tax evasion of some kind.
 
OK guys, there are a couple of things that come to mind here. First off, being long and short the same stock is not a hedge, it's a net flat position. Global positions by same ownership offset each other for short sale rules and tax purposes.

The "Trust Fund Baby Rule" comes to mind as well. For example, if grandpa left you a $million, but you can only draw $5000 a month (grandpa was pretty smart, LOL)....but you have control over the investments. If you wanted to take out $100k or so, you could easily make trades in some illiquid stock, trading with yourself and take the money while the trust fund shows a loss....very illegal obviously.

If you own 500 shares at schwab, and then sell it on the open market and then buy 500 with an IB account, you are basiclly circumventing a couple of rules. Quite likely the wash sale rule. Secondly the matching of trades for capital gain/IRS earnings (by artificially adjusting cost basis, depending on how you were to report the trade(s).

You can, however, simply transfer the stock as mentioned above, most broker will do it with ACATS, as mentioned earlier.

The question itself begs the question of why? Let me know your reason for doing so, I'll do my best to help.


Don
 
Quote from Don Bright:


If you own 500 shares at schwab, and then sell it on the open market and then buy 500 with an IB account, you are basiclly circumventing a couple of rules. Quite likely the wash sale rule. Secondly the matching of trades for capital gain/IRS earnings (by artificially adjusting cost basis, depending on how you were to report the trade(s).



Don
More...

Don, the wash sale rule is a rule for determining how much tax you owe. You can't violate it by selling stock and then buying it back again. You would only violate the rule if you fail to make the proper calculations required by the IRS on your tax return, or if you fail to pay the amount owed as a result of the wash sale. The wash sale rule does not apply to people who meet the requirements to declare themselves professional traders, which probably explains why you are a bit rusty on that rule - I doubt it applies to you.

A wash trade is very different from a wash sale. A wash sale is a pair of legal transactions within IRS time limits of each other, at the end of which your net position is unchanged. A wash trade is very different - it means you are on both sides of the trade, and this is a crime.
 
Quote from jimrockford:

Don, the wash sale rule is a rule for determining how much tax you owe. You can't violate it by selling stock and then buying it back again. You would only violate the rule if you fail to make the proper calculations required by the IRS on your tax return, or if you fail to pay the amount owed as a result of the wash sale. The wash sale rule does not apply to people who meet the requirements to declare themselves professional traders, which probably explains why you are a bit rusty on that rule - I doubt it applies to you.

A wash trade is very different from a wash sale. A wash sale is a pair of legal transactions within IRS time limits of each other, at the end of which your net position is unchanged. A wash trade is very different - it means you are on both sides of the trade, and this is a crime.
More...

"The IRS weighs in
Finally, the IRS has addressed this controversy. In Revenue Ruling 2008-05 (opens a PDF), the IRS essentially took the same position that I had held all along. Can you hear me patting myself on the back?

The example the IRS used in its ruling read something like this: Alex, an individual, owns 100 shares of company stock at a cost basis of $1,000. He sells those 100 shares for $600. The next day, Alex causes an IRA or Roth IRA established for the exclusive benefit of him or his beneficiaries to purchase 100 shares of the same company stock at its current fair market value. Since Alex made the transaction the next day, it came well before the 30 days before or after a sale that the IRS requires if you want to claim the loss on your taxes.

Read the entire ruling if you're at all interested in this issue. It relies on the same 1933 case that I used in my original analysis, and it will help you understand why the taxpayer has "dominion and control" in relation to the IRA.

The bottom line is that the loss Alex realized on the sale of the stock will not be allowed. It will simply be a non-transaction for tax purposes. He can't adjust the basis of any other shares that he owns in his personal account, nor is he able to adjust the basis in the shares that were purchased in his IRA. Even for wash sales, that's a particularly bad result.
http://www.fool.com/personal-finance/taxes/2008/01/30/wash-sales-and-your-ira.aspx"
 
In Futures (sorry if off topic) i have opened seperate accounts with the same broker and to always be legal i ASKED if that was legal to do in the same name. In other words was it legal to be long in 1 acct and short in the other in the same instrument.

the answer i always receive is yes it is legal as long as the intention is for strategy and or tacticcal reasons and not for the purpose of skewing the open interest numbers. Some brokers have required a signed statement from you to clearly state your intentions etc.

EXAMPLE: Be long in one account as a position trade and short in another acct to daytrade adainst the zigs and zags of the position. Really do not do this anymore as just daytrade these days.
 
Quote from shortie:

"The IRS weighs in
Finally, the IRS has addressed this controversy. In Revenue Ruling 2008-05 (opens a PDF), the IRS essentially took the same position that I had held all along. Can you hear me patting myself on the back?

The example the IRS used in its ruling read something like this: Alex, an individual, owns 100 shares of company stock at a cost basis of $1,000. He sells those 100 shares for $600. The next day, Alex causes an IRA or Roth IRA established for the exclusive benefit of him or his beneficiaries to purchase 100 shares of the same company stock at its current fair market value. Since Alex made the transaction the next day, it came well before the 30 days before or after a sale that the IRS requires if you want to claim the loss on your taxes.

Read the entire ruling if you're at all interested in this issue. It relies on the same 1933 case that I used in my original analysis, and it will help you understand why the taxpayer has "dominion and control" in relation to the IRA.

The bottom line is that the loss Alex realized on the sale of the stock will not be allowed. It will simply be a non-transaction for tax purposes. He can't adjust the basis of any other shares that he owns in his personal account, nor is he able to adjust the basis in the shares that were purchased in his IRA. Even for wash sales, that's a particularly bad result.
http://www.fool.com/personal-finance/taxes/2008/01/30/wash-sales-and-your-ira.aspx"
More...

I think that's what I was trying to say in my post. I do admit that I don't trade retail and don't worry about wash sales, but I try to keep up.

Don
 
Quote from jimrockford:

I think that taking both sides of the same trade violates the basic prohibitions against criminal market manipulation imposed by the Securities and Exchange Act of 1934, but I don't remember for sure, so maybe this would be a starting point for your research.

I think that the scheme for transferring funds into or out of a tax-advantaged retirement account would also be considered a criminal fraud or criminal tax evasion of some kind.
More...

Any "intent" to manipulate the market is illegal...
Whether expressly prohibited or not.

Making a trade between 2 linked accounts...
Is not expressly prohibited or illegal.

It depends on what you "intend" to do... and the actual effect it would have on the market.

I was occasionally moving positions between IB accounts just to free up buying power...
But was careful to print it at the last price.

IB sent me a letter asking for an explanation.

After explaining the above...
I never heard back from IB and was not told to stop doing this.
 
From the Securities and Exchange Act of 1934

PROHIBITION AGAINST MANIPULATION OF SECURITY PRICES
SEC. 9. ø78i¿ (a) It shall be unlawful for any person, directly
or indirectly, by the use of the mails or any means or instrumentality
of interstate commerce, or of any facility of any national
securities exchange, or for any member of a national securities
exchange—
(1) For the purpose of creating a false or misleading appearance
of active trading in any security registered on a national securities
exchange, or a false or misleading appearance with respect
to the market for any such security, (A) to effect any transaction
in such security which involves no change in the beneficial ownership
thereof, or (B) to enter an order or orders for the purchase of
such security with the knowledge that an order or orders of substantially
the same size, at substantially the same time, and at
substantially the same price, for the sale of any such security, has
been or will be entered by or for the same or different parties, or
(C) to enter any order or orders for the sale of any such security
with the knowledge that an order or orders of substantially the
same size, at substantially the same time, and at substantially the
same price, for the purchase of such security, has been or will be
entered by or for the same or different parties.
 
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