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Let's be clear about the issue here.
The original question referred to an announcement from Ameritrade about
'making a practice' of buying share A, selling share A, and buying
share B in a cash account before the purchase of share A has settled.
This is a problem in a cash account because the same cash is being used
for both purchases. Therefore, the system will not free up the cash
from the sale of share A until the *purchase* has settled.
This is not the same as saying you may not 'reuse the money of a closed
position for 3 days'.
As I understand it, restriction applies to both cash and to margin
accounts under $25,000, reducing the cash available to trade.
Regards
DanG
Dan Harels wrote:
<blockquote type="cite"
cite="">
Question of clarification:
Is "restriction" of an account purely a function of whether it is cash or
margin account or does the minimum account balance of $25,000 required for
day trading also come into play?
Thanks,
Dan (aka "small fry")
From: "Jacobson, Alex" <AJacobson@xxxxxxxxxxxxxx>
Reply-To: realtraders@xxxxxxxxxxxxxxx
To: <realtraders@xxxxxxxxxxxxxxx>
Subject: RE: [RT] Ameritrade "T+3"
Date: Fri, 21 Nov 2003 19:47:07 -0500
This is restricted cash accounts. This rule for "restricted" accounts will
apply at ALL brokers. Don't allow your account to become restricted.
-----Original Message-----
From: uenal.mutlu@xxxxxxxxxxx [mailto:uenal.mutlu@xxxxxxxxxxx]
Sent: Friday, November 21, 2003 7:12 AM
To: realtraders@xxxxxxxxxxxxxxx
Subject: Re: [RT] Ameritrade "T+3"
It is indeed true! I found this info at their site:
"RESTRICTED TRADING IN CASH ACCOUNTS
On May 29, 2003, Ameritrade implemented changes to its systems relating to
the
calculation of funds available for trading in cash accounts. If you have
any
questions concerning the current balance shown on the Web site, please
contact a
Client Services representative at 800-823-2835.
Under applicable interpretations issued by the staff of the Federal Reserve
Board
System, cash account clients are prohibited from making a practice of
selling
securities without having paid for their purchase with "Available Cash" in
their
account. "Available Cash" includes existing cash in the account, the
proceeds of
settled sales of fully-paid for securities, and additional cash deposits.
Proceeds of a sale of a security where the prior purchase had not yet
settled may
not be included as "Available Cash" before the settlement date of that
prior
purchase - which is generally three business days.
The following example illustrates activity that will result in a 90-day
restriction:
A client is holding $10,000 cash in a cash account. The client then makes
the
following transactions:
The client buys a position in Company A for $10,000, applying the $10,000
in cash
to pay for the purchase.
The client then sells that position in Company A and nets at least $10,000
in
sale proceeds.
Next, the client buys a position in Company B for $10,000, relying on the
proceeds of the sale of Company A shares that have not settled to pay for
the
purchase.
Before the sale of Company A has settled, the client sells the position in
Company B and nets $10,000.
In the above example, the client sold Company B shares before paying for
them.
Trading in this manner in a cash account may result in a 90-day
restriction,
limiting purchases to the "cash" available in your account on trade date. "
----- Original Message -----
From: <uenal.mutlu@xxxxxxxxxxx>
To: <realtraders@xxxxxxxxxxxxxxx>
Sent: Friday, November 21, 2003 6:03 AM
Subject: [RT] Ameritrade "T+3"
Is it true that Ameritrade does not let you reuse
the money of a closed position for 3 days???
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