Updates & Notices
New Day Trading Rules
NASD Rule: The definition of a "pattern day trader" is defined as those customers who day trade four or more times in five business days. If the day trading activities are less than six percent (6%) of the customer’s total trading activity for the five day period, the customer is not considered a day trader. Any customer who PFSI has a reasonable basis to believe is conducting daytrading activities is also classified as a daytrader.
Penson Operational Changes: The number of day trades will be based on opening transactions. Starting the week of September 10, 2001 PFSI will begin the designation process. At that time correspondents will receive a list of customers that meet the day trader criteria and their current margin equity. A subsequent list will be prepared closer to the September 28 implementation date. The day trader designation will be displayed on the web site and Phase 3. Correspondents will be notified daily of any additions to the day trading customer list.
Any correspondent who promotes a "day trading" strategy will have all of their customer accounts coded as daytraders.
Once a customer has received the day trader designation, he or she will remain a day trader until the correspondent requests a reevaluation. If there have been no day trades in 90 days, the day trader status will be removed at that time.
NASD Rule: Pattern day traders must have in their account, minimum equity of $25,000 on any day in which the customer day trades. It is not required that PFSI monitor the minimum equity requirement on an intra-day basis. Day Trading Buying Power (DTBP) is calculated as four times minimum maintenance (25%) margin excess.
Penson Operational Changes: Whenever a customer’s account falls below $25,000 minimum equity, a maintenance call will be issued. The call will be due in three (3) days, which is customary for PFSI. During this time, the customer will be allowed to continue to day trade using four times the day trader’s minimum maintenance margin excess.
If the maintenance call is not met in three days, the account will be limited to liquidating transactions only until it reaches $25,000 minimum equity.
Day Trading Buying Power (DTBP) will be four times the day trader’s minimum maintenance margin excess based on the account’s positions as of the close of business of the previous day. This buying power is for trading in the margin account.
Day trading calls would be calculated on the largest aggregate position using time and tick. As before closing an overnight position does not increase the day trading buying power.
Non-pattern day traders receive four times buying power for day trading but are limited to day trading three (3) times in a five (5) day period. If they exceed this buying power they will receive a day trading call and are subject to the same penalties as a pattern day trader.
NASD Rule: Customers have five (5) business days to deposit funds to meet day trading margin calls. The day trading account is restricted to day trading buying power of two times minimum maintenance margin excess based on the customer’s daily total trading commitment, beginning on the trading day after the day trading buying power is exceeded until the earlier of when the call is met or five business days. If the day trading margin call is not met by the fifth business day, the account is further restricted to trading on a cash-available basis for 90 days or until the call is met.
Penson Operational Changes: If at any time the customer exceeds his or her four times buying power a day trading margin call will be issued due in five (5) business days. Buying power is reduced to two times minimum maintenance margin excess and day trading margin calls would be calculated on the Reg T requirements of every opening position. During this period PFSI will allow no trading in the account until the call is met, unless prior arrangement has been made with management of PFSI.
If the call is not met during this five (5) day period, the customer begins a 90-day restriction period where he or she would be allowed to trade on a cash available basis. This means he is limited to one (1) times buying power and would have pay the initial requirement of every opening position. The restriction would be lifted at the end of 90 days or when the call is met, whichever comes first. If the customer incurs another daytrading call while on restriction the account is immediately closed and limited to liquidating transactions only.
Liquidation of Overnight Positions
The sale of a security held overnight does not create a "daytrade". The sell (buy in) of any existing position will be treated as a liquidation and the subsequent repurchase (sell) will be treated as the establishment of a new position. These trades will not be subject to the rules affecting day trades. Any other trades in the overnight position will be considered a day trade and subject to the day trading rules.
Other Penson Operational Changes:
Funds used to meet a day trading margin call must remain in the customer’s account for two (2) business days following the close of business on any day when the deposit is required.
Pattern day traders are not permitted to use cross guarantees to meet the minimum equity requirements or to meet day trading margin calls. PFSI will be removing all cross guarantees on day trading account
Entire publication © Copyright 2001-2002 GRO Corporation. All Rights Reserved. Member NASD, SIPC.
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