Margin Equity Requirements - Day Trade Margin Account
All accounts classified as day trade margin accounts, must have a minimum equity of $25,000 each day to affect day trades. If account falls below the minimum equity level, a minimum equity call will be issued and is due the same business day. While the minimum equity call is outstanding, the account will be restricted to liquidating transactions only. A client may appreciate out of a minimum equity call.
Margin Equity Requirements - Non-Day Trade Margin Account
Non-day trade margin accounts must maintain a minimum ongoing balance of $2,000 in order to continue their margin status. If the account closes (marked-to-market) below $2,000, the account will be reduced to 1 x buying power. If the account balance is back over $2,000 margin buying power will be restored. You also must maintain a minimum balance of at least $2,000 at all times in order to remain on the downloadable trading software.
Margin Maintenance Requirements
Maintenance Requirement (MR) is that part of the value of your securities that is withheld from your equity when holding a security in your account. The MR is calculated by taking the Market Value (MV) of each security in your account marked to the market multiplied by the Minimum Maintenance Requirement, or the higher House Maintenance Requirement Percentage, if applicable.
A day trade account status exists when the purchase and sale or sale and purchase of the same security on the same day in a single account takes place. Our clearing firm will look at the number of "Opening" transactions to determine the number of day trades in an account.
If a client places more than 3 day trades within a consecutive 5 day period and those trades exceed 6% of the trading activity for that period, the client is defined as a Pattern Day Trader. If a client qualifies as a Pattern Day Trader in a single margin account, then that account will be designated as a Day Trade Margin Account. A client that transacts 4 day trades within 5 business days and also has a total of 100 transactions during that 5 day period would not be deemed a Pattern Day Trader since less than 6% of that customer's total trades would have been day trades. 4/100=4%
Our clearing firm and AutoShares will run a query to see which customers meet the day trading definition criteria. On a daily basis, the trading activity in each individual account will be assessed to match and calculate the number of day trades for that day. This information will then be compiled with the previous 4-business day's trades to determine the status of the account. Clients will be notified by e-mail the following business day if their account meets the Pattern Day Trader requirements and is converted to a Day Trade Account.
For the purposes of Pattern Day Trading, a "security" is defined to include both equity (stock) and option transactions.
The client can advise AutoShares in writing (by signing the Pattern Trader Change of Strategy letter) via fax to remove the classification of a Pattern Day Trader from his/her account. Note: Clients may request to change their account classification (day trade to non-day trade) ONLY one time per 90 days.