Why brokers are tough to cash accounts ?

Quote from bwolinsky:

Not in an IRA or 401k bud. Do some research and realize you need a system that holds overnight.
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Thanks. That should be my plan.
 
Can anyone name another buy sell system which operates this way in any business? Esp in this day of the computer and instant money and face it the trades probably clear instantly anyways.
 
Quote from Buzzed:

3 day trades maximum per week, and you need to wait for the settlement date to trade the used funds again.
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You guys are all repeating the rules. My question is "WHY"?
What possibly can go wrong if I trade 500 million times aday? Why when I sell, my the money is not there?
My point is that it is a silly useless rule. I believe no danger faces the broker if they (SEC or brokers) remove the rule.
 
Here's the problem:

Assume you have $1 in your account. Your broker won't stop you from making any trades (i.e. if you decided to buy a stock worth $5 (assume no commission). This puts your account at $-4, which your broker won't stop you from doing.

Assume stock goes up to $6 that day. You then sell and make $1 profit. This is why it's a free ride and is not legal. You could technically use money you don't have to buy stock and make a profit.
 
Quote from Buzzed:

Political pressure is why. I remember in the 90's a big hoopla about evil day traders in the media. For some reason, the public decided the day traders were responsible for the bubble which led to the tech burst. Hence why the rule was set into place in 2001.

I agree, there would be no added danger if the rule was lifted.
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I don't think the OP was talking about the Day Trading margin rule.

You trade stocks in a cash account (or 401K, IRA). It is subjected to the T+3 days for settlement. This is from the old days. It used to be T+5 days. There are people who do not hold stocks in street names and they demand the stock certificates. When they sell their stocks, SEC allows them 3 days to send their stock certificates to the brokerage firm to clear the trade.
 
You could technically use money you don't have to buy stock and make a profit.
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Ah..... the old "rent a balance sheet" ploy. Ahem... wall street will have none of that.
 
Quote from hajimow:

Thanks but you are just repeating the same rules that do not make sense. I have 50K and I should be able to do 100s of trades a day as long as I sell my previous position before I get into a new position unless my broker is not sure whether he will get his money when I sell my shares :D
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Why do I have to do anything that doesn't make sense to me if the rules/laws say that I have to do it that way ???

Deal with it :)
 
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