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Margin maintenance requirements Scottrade

The Financial Industry Regulatory Authority (FINRA) increased the maintenance requirements for leveraged exchange-traded funds (ETFs) in day trading margin accounts beginning on April 30, 2010. For more information about what constitutes day trading, visit Counting Day Trades or the Day Trading Q&A in the Knowledge Center.

Leveraged ETFs mix equities with derivatives to magnify exposure to the benchmark index, and they have daily investment objectives. Leveraged ETFs are generally either two-times (2x) leveraged or three-times (3x) leveraged, meaning that while a regular ETF will attempt to match the benchmark index's performance 1:1, a leveraged ETF will usually match it 2:1 or 3:1.

The FINRA intraday maintenance requirements for leveraged ETFs are 25% multiplied by the amount leverage on an ETF. So, a 2x leveraged ETF will have an intraday maintenance requirement of 50% (25% x 2), and the intraday maintenance requirement for a 3x leveraged ETF would be 75% (25% x 3):

Exchange-Traded Fund

Intraday Maintenance Requirement

2x Leveraged ETF

50%

3x Leveraged ETF

75%

Scottrade's overnight maintenance requirements for leveraged ETFs are slightly higher, as follows:

Overnight Maintenance Requirement

55% (long) or 60% (short)

80% (long) or 85% (short)

Impact on Day Trading Buying Power

Day trade buying power (DTBP) is also impacted by the amount of leverage on a leveraged ETF purchased. Day trade buying power for a leveraged ETF is calculated by dividing your maintenance excess at the beginning of the day by FINRA's maintenance requirement of the fund you're purchasing.

For example, if you have $10, 000 in maintenance excess at the beginning of the trading day, you would normally divide by the NYSE minimum maintenance requirement of 25% (.25) to arrive at your DTBP of $40, 000. However, if you're buying leveraged ETFs, your DTBP changes according to the intraday maintenance requirements:

If you purchased a ...

Your DTBP would be ...

Non-Leveraged ETF

$40, 000 ($10, 000/.25)

$20, 000 ($10, 000/.50)

$13, 333 ($10, 000/.75)

Self-Regulatory Organizations; ICE Clear Europe Limited; Order Granting ..  — Insurance News Net
ICE Clear Europe states that the changes to the Risk Policy amend the calculation of CDS initial margin requirements to comply with margin requirements under EMIR Article 41 and Article 24 of the implementing Regulatory Technical Standards. /5/ ICE ..

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Popular Q&A

avatar
What are the requirements to open a margin account with a stock broker like ameritrade or scottrade?

If Im a student with a income of only a couple thousand a year is it still possible to get a margin account or will I be denied?

"What is the minimum amount required for opening an account?
Generally, $1,000 equity is required to open an IRA, and $2,000 equity is required to open any non-IRA. Your minimum initial deposit is based on the account type you have selected and may be modified by special promotional offers. Regardless of any promotional offer, a $2,000 minimum deposit is required to be considered for margin and options privileges."
That's per ameritrade's policy.
Now, I invest mainly at Edward Jones, and they're a little more flexible. I would recommend going to a local EJ broker. The meeting is free…

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