hafnium Member  Posts: 43 Joined: 10/11/2012 Location: Vienna, VA  User Profile | I will start out stating that I am no expert in the subject matter being discussed. I wanted to intervene to make every one aware that the premise that this issue only applies to IRAs is not entirely true (IMHO). The rule actually says that Investors must settle their security transactions in three business days. This settlement cycle is known as "T+3" — shorthand for "trade date plus three days." By the way, T+3 becomes T+1 for options and Government Securities. Note - its not specific to IRA accounts. More information on it can be found here: http://www.sec.gov/investor/pubs/tplus3.htm The issue here I believe is more accurately described as a Margin Account vs a Cash Account issue. As the settlement date of trades is set by and regulated by the Federal Reserve (Regulation T). ALL firms settle trades on the settlement day – it’s the law. If you use a margin account - the broker will normally let you use the unsettled funds to make additional purchases. You may not be able to sell these securities until the purchasing funds are settled however. This issue is called "free riding" and is discussed further in the discussion below: http://sixfigureinvesting.com/2010/01/trading-in-ira-accounts-and-avoiding-free-riding/ Also - be aware that different brokers handle the "Free Riding" issue slightly differently - even though they are all addressing the same regulations. Sorry - I'm not sure that I furthered the discussion in a positive way. Just wanted to let everyone know that this issue is not specific to IRAs | |
