Within the direct access marketplace, margin related topics are very important. We encourage our trading community to become more familiar with such matters. Of course, there may always be individual circumstances that require special handling.
Traders should ALWAYS review their questions and concerns first with their respective Branch Office Manager/Supervisor. The Assent Margin Department can also assist you with specific questions.
The Assent Margin Department can be reached at :
Phone: (201) 356-1415
E-mail: Assent.MarginDepartment@SunGard.com
Frequently Asked Questions – MARGIN RELATED TOPICS
What is direct access trading?
Direct Access Trading allows traders to trade directly with market participants, such as exchanges and ECNs, instead of routing your order to a market maker (who will mark-up or mark-down your trade). In direct access trading, once your order leaves our servers, (after it’s checked against various criteria) you have the ability to see and trade with the actual quotes in the market. There is no middleman. For most day traders this translates into superior executions and lower costs.
What is day trading?
Day trading is the buying and selling (or selling and buying, i.e. "round turns") --- often in compressed time frames --- of the same security on the same day in a margin account. Since the closing out of an existing position from the previous day is considered a liquidation (assuming it's the first trade in that stock for that day) the subsequent repurchase of that security is considered to be the establishment of a new position. Since margin interests are typically only charged on overnight balances, the extra costs discourage traders from holding positions overnight.
What is a pattern day trader?
A pattern day trader is a term defined by the SEC to describe a trader who executes four (4) or more trades within five (5) business days, where the number of day trades exceeds 6% of the trader’s total trading activity for the five-day period, in his/her margin account. As a trader is exposed to the danger of day trading and intraday risks, he or she is subject to specific requirements and restrictions. In addition, a firm will continue to regard such a trader as a pattern day trader even he/she does not day trade for a five day period, because they will have a "reasonable belief" that he/she is pattern day trader based on prior trading activities.
What is Margin and how do I use it to trade?
Generally, the securities industry, in order to encourage securities trading activity, permits securities Broker-Dealers to loan their customers part of the cost of the securities they purchase. Through this borrowing the customer is able to buy more securities with the same amount of cash. Interest is charged on the resulting debit balance.
As distinguished from a margin account, what does it mean to open a "Cash Account"?
A cash account is an account that limits your buying power to the amount of cash required to cover the purchase in full. Cash accounts may only be used to purchase securities, or sell securities previously owned. No short selling is permissible in a cash account.
However, almost all Assent accounts are opened exclusively as margin accounts.
What is the minimum balance requirement for customer day trading accounts?
According to FINRA, pattern day traders must maintain minimum equity of $25,000, which must be in the account prior to any day-trading activity, on any day the customer trades. Accounts with less than $25,000 equity will not have access to our front-end direct access trading platform. Assent purposefully maintains a minimum equity of $30,000 to open a new day trading account.
What is day trading buying power, and how is it calculated?
Day trading buying power is the amount of intra - day funds that is available for day trading purposes. It is limited to four (4) times NYSE maintenance margin excess (the amount of equity in excess of the minimum margin requirement), based on the customer's account positions as of the close of business of the previous day.
What is a day trading margin call, and how does it affect my account?
A day trading margin call is generated when a customer day trades in excess of day trading buying power. Upon notification of the day trading margin call, the customer has twenty-four (24) hours to meet the call, or the account will be disabled from accessing our electronic trading platform. Access will be restored only when the call has been met, or when a ninety (90) day restriction period has expired.
If the day trading margin call is not met by the fifth (5) business day, the account will be further restricted to trading only on a cash available basis for 90 days or until the call is met.How can I tell if a stock that is trading right around $2 is marginable or not?
All stocks below $2 are non-marginable as well as certain other stocks above $2. A stock that was below $2 must close above $2 before it can be marginable. If you are unsure if a stock is marginable, please contact your Branch Office Manager or the Assent Margin Department for assistance. Option purchases are not marginable and can be effectuated only with cash available in your account.
Assent's trading system is preventing me from entering certain orders. I'm seeing an order reject message that warns me that I don't have sufficient available equity. What is this all about?
FINRA restricts the amount of capital available for day-trading to 4x or 1x your beginning excess equity, depending on the status of your account. Any order placed above this amount will create a day-trading call. Our systems are designed not to accept any orders that exceed margin requirements, thus preventing day-trading calls. You also need to be aware of any live or pending orders in your account. These orders will hold equity as if they have already been filled. If you cancel these orders before they are filled the equity returns to your account. If the message states that you have $0 equity, you may have a disruption in your connection to our servers. This can be corrected by logging off and back in to the trading platform.
How is my buying power calculated?
Overnight buying power (excess equity) is calculated based on what you have held overnight from the previous trading day. If you hold no positions overnight your overnight buying power will be twice your NYSE excess equity (2 to 1), for marginable stocks. Any additional equity would be your overnight excess equity. If your account is concentrated (see below), 40% of the market value of your positions must be maintained overnight. If your account is concentrated in any one single security, 50% (or higher, as Assent may, at its discretion impose higher equity % requirements) of the market value of your positions must be maintained overnight.
Day trading buying power will be 4 to 1 for accounts with at least of $25,000, (a new account with $25,000 can buy and sell up to $100,000 worth of stock as many times as is wanted). If you do not meet this minimum you may only trade two times the amount of your SMA, and you may only trade your total equity once per day. For example, a $10,000 account may buy $10,000 of stock A and sell it, then buy $10,000 of stock B and sell it. After these two transactions the account would no longer have Day trading buying power. (Note: Your Day Trading buying power will usually be greater than your overnight excess equity. If you do not close a sufficient amount of day-trades and exceed your overnight excess equity you will create a Regulation-T call.)
What makes a position "concentrated" and how does this affect my account?
A position is concentrated when the market value of a single position in your account exceeds the total margin equity in the account, and your account is on margin by more than $5,000. When you have a concentrated position in your account, your equity percentage (total equity/total market value) must be at least 40% for your account. If your account is concentrated in a certain sector of stocks you must maintain a percent equity of 50%, or higher depending upon Assent's review.
What is my equity percentage and how do I calculate it?
Your equity percentage is your equity divided by the total market value of all your stock. (For example: a $50,000 account holding $100,000 worth of marginable stock would be at 50%, 50,000/100,000). If you are holding non-marginable stock (including stocks trading below $2), you must subtract this amount out of both your total equity and your total market value before calculating your equity.
How are the various types of margin calls created and how and when must I meet them?
Equity Maintenance Calls are created when your account closes below $25,000. It is not mandatory to meet this call, but you will lose the ability to electronically trade through our front - end trading software. In other words, you'll be unable to electronically take advantage of the day trading rules, which permit day traders to trade with four (4) times the NYSE excess equity subject to time and tick computation methods. While a maintenance call is in effect, you will only be able to open positions that are twice your available SMA. Please note that liquidating stock does not change your intra day equity. You may hold positions overnight using twice your SMA, but you must call Assent’s Order Desk to place these trades.
NYSE Calls are created when your equity percentage falls below 25%. You may sell stock or send in additional funds and have 2 business days to meet this type of call.
House Calls are created when your account's equity percentage falls below 40%. If your account is concentrated in a certain sector, say technology stocks, this type of call will be created once your account's equity percentage falls below 50%. You have five (5) days to meet this call.
Regulation T (Federal) Calls are created when you exceed your overnight buying power. This means you've carried more stock overnight than you have SMA to cover. Since you have more buying power for day-trading purposes (4:1) than you have for holding positions overnight (2:1), it is possible to create this call if you do not close any day trades that exceed your overnight SMA. For example, a new $25,000 account can buy $100,000 worth of stock intra-day (4 to1). But at the end of the day, the account must not hold more than $50,000 worth of stock overnight (2 to 1). This type of call can be met by sending in new funds to your account, or liquidating appropriate positions and you have 5 business days to meet this call. If you have an unmet Reg-T call in your account and create another one, you will have five business days to meet the additional call. Please note that traders will, wherever possible, be prevented from the practice of creating multiple Fed Calls.
If Fed Calls are not met by the 5th day, Assent will liquidate positions to meet the call.Day Trading Calls are created when you exceed your Day trading buying power. It is important to ensure that any one of your orders does not exceed your Day Trading buying power; this includes live orders that have not been filled. If you do create a Day Trade call you will need to meet the call on the day of notification. It MUST be met by sending in new funds to the account.
How will I know if my account receives a margin call?
Our Margin Department will attempt to alert you via e-mail, via the e-mail address you have previously supplied on the new account form. It is imperative that you alert your Branch Office Manager immediately when your contact information, including your e-mail address has changed. Your Branch Office Manager has been provided with an expedited channel to communicate such e-mail address updates. When there's a margin call, we will also alert your Branch Office Manager. If you're unsure how to contact your Branch Office Manager, we suggest that you visit the Branch Locations segment of this site.
Why can't I sell a stock to cover a Regulation T call?
A stock can be sold to cover a Regulation T call as long as it is not the stock that created the call to begin with. Reg T calls can be met by check deposit, wiring - in of funds, and or depositing fully - paid - for negotiable securities valued at least two (2) times the amount of the Regulation T call.
I sold an overnight position today. Why isn't the buying power on my account updated?
Your account begins each day with a certain amount of excess equity (Day Trading buying power). Per FINRA rules, this amount cannot increase. The decrease in buying power due to losses is calculated to prevent margin calls in your account.
My buying power (excess equity) is significantly lower than what I think it should be. Why?
Keep in mind that the sale of overnight positions will not free up buying power during the day, but will be updated over night. Also, stock priced below $2 must be fully paid for and is not marginable. You may also have multiple pending live orders, which will decrease your buying power. Logging off the software and your internet connection and then logging back in to both will refresh your buying power displayed. If you still believe your buying power is incorrect please contact your Branch Office Manager. He/she may be aware of something that you are not. If the Branch Office Manager cannot satisfactorily address your open concern on his/her own, they can contact the Margin Dept. for further consultation.
Can I hold trades overnight?
Of course, provided that doing so does not exceed your Overnight Excess Equity. You can initially purchase two times your available SMA in marginable stock, for overnight holding. Your equity percentage (total equity/total market value) must be maintained at 25% (40% for House Maintenance and 50% for an account concentrated in any one single security). If you exceed your Overnight Excess Equity you will create a Regulation T call.
I’ve been away for a few days and I see that my position(s) was liquidated. Why?
Most likely because we had no response from you when we attempted to initially contact you to alert you to one or more mandatory calls that had to be met in order to maintain your margin account. Thus, one or more of your positions had to be liquidated in order to protect you and to continue to keep your account in good standing. Again, please make sure that we always have your correct e-mail address and phone #' s at all times so that we may contact you immediately in the future.
How are the rates calculated for borrowing money on my Margin Account in order to purchase stocks?
The annual rate of interest which is charged on net debit balances (the amount that you have borrowed) is calculated by a formula based on a base rate we establish. Interest is computed by multiplying the daily net debit balance by the effective rate of interest divided by 360. The average rate of interest is subject to change without prior notice.
When does my account balance update to reflect my account activity?
Customer account cash account balances are updated immediately. Margin account buying power is updated at the end of each day. For questions regarding margin buying power, first, please contact your Branch Office Manager. If your Branch Office Manager is not able to resolve your question, they can contact our Trade Support Desk at 201 356 – 1423, or our Margin Department at (201) 356 – 1415.
Are accounts at Assent covered under any “account protection” programs?
Generally, most accounts are protected by the Securities Investor Protection Corporation (SIPC). SIPC provides protection up to a $500,000 limit, of which $100,000 may be for cash balances. In addition, Assent maintains supplemental account protection to provide excess SIPC protection. Please note that trading losses are not covered under any such programs.
Does Assent monitor and/or manage “exposure” to my account?
Traders are responsible for their accounts and the activity within such accounts. Moreover, we carry out certain intra – day risk monitoring activities, which typically include alerting you and your Branch Office Manager and/or referring member if your account has exceeded certain loss limit and position exposure thresholds. Additionally, our front - end trading software includes several parameter fields which you and your supervisor can set for your account. Such parameters can assist you in more effectively managing risk and exposure factors. We encourage you to find out more about these parameters and how they work within our trading system.
