Every trade executed in a cash account takes three business days to settle. For this reason, proceeds from a sale transaction are generally not available for purchases until the third business day based on the rule of Regulation T of the Federal Reserve Board. The following describes the rules and policies of using the proceeds from cash account transactions.

1.

Cash accounts that demonstrate a pattern of using unsettled sale proceeds towards new purchases and then selling the newly purchased shares before the sale proceeds have settled will be restricted for 90 days and coded "funds in advance of trading due to good faith violations". For example, a customer who uses sale proceeds sold in his cash account on Tuesday may purchase other securities on Tuesday through Thursday, but may not sell the new shares until the original sale proceeds have settled on Friday. Cash accounts having a pattern of selling shares that were paid by unsettled sale proceeds will be restricted. A pattern will be defined as four occurrences within a 12-month period.

2.

Day trading in cash accounts will be permitted only once per settlement cycle. For example, a cash account with a $30,000 free credit balance may buy and sell $30,000 worth of the same stock on a Tuesday, but may not reuse the $30,000 toward another purchase until the sale proceeds have settled on Friday (or Wednesday for options transactions). Cash accounts that show a pattern of reusing free credit balances before sale proceeds have settled will be restricted for a period of 90 days and coded "funds in advance of trading due to excessive cash account day trades". A pattern will be defined as four occurrences within a 12-month period.

These rules have been in place for awhile and affect every brokerage firm in the United States. Recent regulatory actions and trading practices have brought this matter to the forefront. If you wish to continue trading in the method discussed above, it is recommend that you do so in a margin account. In a margin account, no consideration is given to the settled or unsettled status of sale proceeds when computing various margin account calculations.

To apply to switch from a cash account to a margin account, please download and print the Account Update Form and the Margin Agreement. Complete, sign, and mail these two forms to MarkeTrade.com to request margin privileges for your account.

Click here to view the FINRA Notice about these rules. For more information on Day Trading Rules, please read Day Trading Rules and Day Trading FAQ.