Merrill Edge Review 2018

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The required minimum equity must be in the account prior to any day-trading activities. Merrill lynch trading brokerage account application rules permit a pattern day trader to trade up to four times the maintenance margin excess in the account as of the close of business of the previous day.

If a pattern day trader exceeds the day-trading buying power limitation, the firm will issue a day-trading margin call to the pattern day trader. The pattern day trader will then have, at most, five business days to deposit funds to meet this day-trading margin call. Until the margin call is met, the day-trading account will be restricted to day-trading buying power of only two times maintenance margin excess based on the customer's daily total trading commitment.

If the day-trading margin call is not met by the fifth 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. In addition, the rules require that any funds used to meet the day-trading minimum equity requirement or to meet any day-trading margin calls remain in the pattern day trader's account for two business days following the close of business on any day when the deposit is required.

The rules also prohibit the use of cross-guarantees to meet any of the day-trading margin merrill lynch trading brokerage account application. The primary purpose of the day-trading margin rules is to require that certain levels of equity be deposited and maintained in day-trading accounts, and that these levels be sufficient to support the risks associated with day-trading activities. It was determined that the prior day-trading margin rules did not adequately address the risks inherent in certain patterns of day trading and had encouraged practices, such as the use of cross-guarantees, that did not require customers to demonstrate actual financial ability merrill lynch trading brokerage account application engage in day trading.

Merrill lynch trading brokerage account application margin requirements are calculated based on a customer's securities positions at the end of the trading day. A customer who only day trades does not have a security position merrill lynch trading brokerage account application the end of the day upon which a margin calculation would otherwise result in a margin call.

Nevertheless, the same customer has generated financial risk throughout the day. The day-trading margin rules address this risk by imposing a margin requirement for day trading that is calculated based on a day trader's largest open position in dollars during the day, rather than on his or her open positions at the end of the day.

The SEC received over comment letters in response to the publication of these rule changes. Day trading refers to buying then selling or selling merrill lynch trading brokerage account application then buying the same security on the same day.

Just purchasing a security, without selling it later that same day, would not be considered a day trade. As with current margin rules, all short sales must be done in a margin account.

If you merrill lynch trading brokerage account application short and then buy to cover on the same day, it is considered a day trade.

Your brokerage firm also may designate you as a pattern day trader if it knows or has a reasonable basis to believe that you are a pattern day trader. For example, if the firm provided day-trading training to you before opening your account, it could designate you as a pattern day trader.

Would I still be considered a pattern day trader if I engage in four or more day trades in one week, then refrain from day trading the next week? In general, once your account has been coded as a pattern day trader, the firm will continue to regard you as a pattern day trader even if you do not day trade for a five-day period. This is because the firm will have a "reasonable belief" that you are a pattern day trader based on your prior trading activities.

However, we understand that you may change your trading strategy. You should contact your firm if you have decided to reduce or cease your day trading activities to discuss the appropriate coding of your account. This collateral could be sold out if the securities declined substantially in value and were subject to a margin call. The typical day trader, however, is flat at the end of the day i. Therefore, there is no collateral for the brokerage firm to sell out to meet margin requirements and collateral must be obtained by other means.

Accordingly, the higher minimum equity requirement for day trading provides the brokerage firm a cushion to meet any deficiencies in the account resulting from day trading. The credit arrangements for day-trading margin accounts involve two parties -- the brokerage firm processing the trades and the customer.

The brokerage firm is the lender and the customer is the borrower. No, you can't use a cross-guarantee to meet any of the day-trading margin requirements. Each day-trading account is required to meet the minimum equity requirement independently, using only the financial resources available in the account.

What happens if the equity in my account falls below the minimum equity requirement? I'm always flat at the end of the day. Why do I have to fund my account at all?

Why can't I just trade stocks, have the brokerage firm mail me a check for my profits or, if I lose money, I'll mail the firm a check for my losses? It is saying you should be able to trade solely on the firm's money without putting up any of your own funds. This type of activity is prohibited, as it would put your firm and indeed the U. The money must be in the brokerage account because that is where the trading and risk is occurring.

Merrill lynch trading brokerage account application funds are required to support the risks associated with day-trading activities. You can trade up to four times your maintenance margin excess as of the close of business of the previous day. You should contact your brokerage firm to obtain more information on whether it imposes more stringent margin requirements.

If you exceed your day-trading buying power limitations, your brokerage firm will issue a day-trading margin call to you.

Until the margin call is met, your day-trading account will be restricted to day-trading buying power of only two times maintenance margin excess based on your daily total trading commitment. Day trading in a cash account is generally prohibited. Day trades can occur in a cash account only to the extent the trades do not violate the free-riding prohibition of Federal Reserve Board's Regulation T. In general, failing to pay for a security before you sell the merrill lynch trading brokerage account application in a cash account violates the free-riding prohibition.

If you free-ride, your broker is required to place a day freeze on the account. No, the rule applies to all day trades, whether you use leverage margin or not. For example, many options contracts require that you pay for the option in full. As such, there is no leverage used to purchase the options. Nonetheless, if you engage in numerous options transactions during the day you are still subject to intra-day risk.

You may not be able to realize the profit on the transaction that you had hoped for merrill lynch trading brokerage account application may indeed incur substantial loss due to a pattern of day-trading options. Again, the day-trading margin rule is designed to require that funds be in the account where the trading and risk is occurring. Can I withdraw funds that I use to meet the minimum equity requirement or day-trading margin call immediately after they are deposited?

No, any funds used to meet the day-trading minimum equity requirement or to meet any day-trading margin calls must remain in your account for two business days following the close of business on any day when the deposit is required.

Frequently Asked Questions Why the change? Were investors given an opportunity to comment on the rules? Definitions What is a day trade? Does the rule affect short sales? Does the rule apply to day-trading options? The day-trading margin rule applies to day trading in any security, including options.

What is a pattern day trader? Day-Trading Minimum Equity Requirement What is the minimum equity requirement for a pattern day trader? Can I cross-guarantee my accounts to meet the minimum equity requirement?

Buying Power What is my day-trading buying power under the rules? Margin Calls What if I exceed my day-trading buying power? Accounts Does this rule change apply to cash accounts? Does this rule apply only if I use leverage?

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This application claims priority to, and the benefit of, U. The present invention relates generally to a securities trading and brokerage account application processing system, and in particular, to a system and method for facilitating real-time brokerage account decisioning and approval over a distributed network.

The traditional method of establishing a brokerage account with a broker involves the process of completing a brokerage account application, selecting a type of brokerage account, signing the application, submitting the application and funding the brokerage account. Typically, not until the application papers have been received and processed and the brokerage account funded check clears, wire transfer complete, etc.

Additionally, many brokers often require an Applicant to submit to a credit evaluation which may also delay the start of trading.

With the changing market environments, volatility of the stock market, increases in trading volume, and high turn-around in everyday trading activity, along with other changes to investor behavior, investors are increasingly looking for ways to expedite the brokerage account application process so as to take advantage of these changing market conditions.

In other words, investors do not wish to wait for a week, or even a day, until application papers are received and processed or for a check to clear. A few online brokerage companies have recently entered the competition for investor business and have addressed some of the investor desires for expedited processing of brokerage applications. These online companies have expedited some of the processes by allowing the completion of the brokerage application online, thereby eliminating some of the delays associated with mailing the application to and from the broker.

These online brokerage companies, however, have typically not allowed the Applicant to apply and get approved in a real-time environment for a brokerage account. In other words, although a brokerage account may be applied for online, the investor-Applicant must often wait until a later point in time for account approval. And, not until some later point in time is the Applicant then able to place a trade.

Furthermore, not only is the online investor-applicant traditionally not able to complete the brokerage application process during the same online session, but the investor-applicant is not able to fund the account immediately. A need exists to overcome traditional problems of the prior art by allowing the investor-applicant to not only complete an online application in one online session, but to begin trading with a pre-established trading limit as well.

The present invention relates to a system and method for processing a brokerage account application in a real-time environment. An exemplary embodiment of this invention comprises a host system, one or more credit bureau systems and one or more trading systems, where the host system further comprises a user interface system for accepting application data from a user, an application server for processing data, and suitable interface systems and protocols to communicate with external credit bureau and trading systems to effect the desired credit processing and trading requests.

Additional aspects of the present invention will become evident upon reviewing the non-limiting embodiments described in the specification and the claims taken in conjunction with the accompanying figures, wherein like reference numerals denote like elements.

The present invention generally relates to a comprehensive real-time account application processing and decisioning system and method for accepting applicant data, processing applicant data, making a credit decision, processing user authentication data e. This system and method enables an applicant to set-up a brokerage account and begin trading online in a real-time environment. As such, an exemplary system may set, for example, a 60 second period of response from a credit system, so as to return a response to an Applicant before the Applicant's browser times-out typically two minutes.

By way of a general overview, exemplary components of the present invention are illustrated in FIG. Web page screen shots are provided to further illustrate the process of applying for an account in a real-time environment. An exemplary real-time application system comprises a number of servers, databases, interfaces, software routines, protocols, etc. These components, as one skilled in the art will appreciate, may be configured in any number of ways to achieve or facilitate the functionality desired.

As illustrated in FIG. The Host System interfaces with the Credit Bureau System over a suitable computer network and using appropriate transmission protocols. The Host System is also configured to communicate with a Trading System , which is capable of receiving an Applicant's 1 trade request and placing Applicant's order. The Host System is further configured to process and communicate data in a real-time environment. As such, as depicted in FIG. Additionally, the Host System comprises one or more databases, such as the accounts database These systems work together in a manner described herein to achieve a novel real-time account application system, which may preferably be used to facilitate the opening of a brokerage account to allow real-time trading.

A general overview of an exemplary process of the present invention is now provided in reference to FIG. First, an Applicant 1 using a suitably configured computer system, applies for a brokerage account with Host System over a Distributed Network 20 , where application data is received STEP 1 a by the Web Server In an exemplary embodiment, the formatting and communication process between the Host System and the Credit Bureau System is facilitated with a credit bureau interface, which although not show in FIG.

Finally, the Trading System provides the Security Processing System with user authentication information e. The present invention is described herein in terms of functional block components FIG. For example, the present invention may employ various integrated circuit components, e. Further, it should be noted that the present invention may employ any number of conventional techniques for data transmission, signaling, data processing, network control, and the like.

For a basic introduction of cryptography and network security, the following may be helpful references: For additional information on communication systems, see Gilber Held, Understanding Data Communications ; Dilip Naik, Internet Standards and Protocols ; and Java 2 Complete, various authors Sybex ; all of which are hereby incorporated by reference.

An additional application relating to application processing systems and processes is U. Provisional Patent Application Ser.

As referred to generally above and as shown in FIG. As those skilled in the art will appreciate, the Applicant's computer system 10 typically comprises a computer processor, memory elements, and a means, such as any modem or network device for connecting to a distributed network. The computer system 10 will typically include an operating system e. The computer system 10 may be in a home or business environment with access to a network. In an exemplary embodiment, access is through the Internet through a commercially-available web-browser software package.

The computer system 10 , however, is not limited to a home or work personal computer. The computer system 10 includes any processor or microchip-enabled device that is capable of connecting to any distributed network to communicate with the systems of the present invention.

The distributed network 20 , as defined herein, includes any type of computerized network capable of facilitating communication between the parties to the account application process e. It will be appreciated that many applications of the present invention could be formulated. The computing units may be connected with each other via a data communication network.

In the illustrated implementations, the network is embodied as the internet In this context, the computers may or may not be connected to the internet 20 at all times. For instance, the Applicant's computer system 10 may employ a modem to occasionally connect to the internet, whereas the host Web Server computing environment might maintain a permanent connection to the internet The network may be implemented as other types of networks, such as an interactive television ITV network.

The host system Web Server , is an exemplary user interface device which may provide a suitable website or other Internet-based graphical user interface which is accessible by users. In addition, to provide load balancing and fail-over, load controllers may be placed in front of the web servers and between the web servers and the application servers Also depicted in FIG. In an exemplary embodiment, one Web Server is utilized on the front-end of the account application system and another Web Server is utilized on the front-end of the trading system.

As can be appreciated, the present invention can be configured with any suitable user interface system, and any number of user interface systems, which allow for communication between the Applicant 1 and the Host System The Application Server , as defined herein, includes any type of host server or other computing system including a processor for processing digital data, a memory coupled to said processor for storing digital data, an input digitizer coupled to the processor for inputting digital data, and an application program stored in said memory and accessible by said processor for directing processing of digital data by said processor.

Various other known in the art methods and protocols may be used to facilitate communication between the host system server systems and other internal or external systems.

The primary function of the Workflow System is to process and facilitate requests that are not automatically processed by the application server As such, the Workflow System is configured to allow application data to be captured and available for manual processing in the event that a particular applicant is not approved or when an error in the automated processing occurs.

Common database products that may be used to implement the databases include DB2 by IBM, any of the database products available from Oracle Corporation, Microsoft Access by Microsoft Corporation, or any other database product. The database may be organized in any suitable manner, including as data tables or lookup tables.

In an exemplary embodiment, the Host System provides the Credit Bureau System with business rules which are applied against the Applicant's retrieved credit score. In other words, the Host System provides the Applicant's 1 personal data name, address, income, etc. The Credit Bureau System retrieves the Applicant's credit report information and compares that information against pre-defined business rules. This decisioning process enables the Credit Bureau System to evaluate the Applicant's 1 credit worthiness in a real-time environment and provide a credit decision, from which the host system will then open an account or return an error message to the Applicant 1.

Although the embodiment contemplated in FIG. In an exemplary embodiment a distributed credit bureau communication system also known as a credit bureau interface CBI is used. With this embodiment, the Application Server may access a separate CBI component configured to communicate with various credit bureau systems.

As such, the Application Server issues a request to the CBI with relevant application data and a unique identifier. The data required for the particular account application is transmitted to the CBI in a format that is natively defined, by using, for example, Java Programming language constructs. The request is then processed by the Credit Bureau System , passed through the CBI and presented to the Application Server with a response that is defined by using, for example, the native Java programming language constructs.

The Securities Processing System is a system of record for managing brokerage accounts and the execution of transactions. Furthermore, the Securities Processing System is configured to communicate with the Application Server and the Trading System to facilitate online account management and trading for the Applicant 1. Any known in the art trading systems capable of communicating with the Host System in a real-time environment, and suitably licensed to facilitate consumer trading, may be utilized.

The automated real-time account application process, as shown in FIGS. The Applicant 1 must first be able to apply for the brokerage account. As such, a Web Server facilitates communication with the Applicant 1 via a user's computer system 10 over a distributed network 20 such as the internet. In general, the applicant selects account type and preferences and then submits personal data e.

The Application Server serves as the hub for account processing. In response to the Application Server's request, the Credit Bureau System receives the application data and evaluates the data by applying the host system's business rules to the particular Applicant 1.

In an exemplary embodiment, to facilitate the real-time application process, the Host System sets various response-time parameters for its sub-systems and third party participants.

For example, if the Credit Bureau System does not respond within a predefined period of time e. If the Applicant 1 is not approved during this automated real-time process e. If the Applicant 1 is approved via the real-time process just described, one or more account databases are accessed by the Application Server to open, for example, a brokerage account with a pre-established trading limit e.

The brokerage account with a pre-established trading limit is then activated by communicating with a Securities Processing System In communication with a trading system, user authentication information is retrieved.

To facilitate the separate application and trading processes, the present invention may be configured with separate user interface systems, such as a Web Server on the front-end of the application process and Web Server on the front-end of the trading process.

The above described account application process is preferably accomplished in a substantially real-time environment. For example, in an exemplary embodiment, the application process from submission of data to the credit bureau to the opening of an active account capable of executing trades takes no longer than approximately two minutes, although other embodiments exceeding a two minute application process are possible taking into account system throughput, traffic, Applicant response, field completion times, etc.

Turning now to brief overview of an embodiment of the application process from an Applicant's 1 perspective, exemplary web page screen shots are depicted in FIGS. Applicant 1 , upon accessing an online brokerage website and choosing to apply for a brokerage account is presented with and is given the option of accepting electronic delivery of a prospectus FIG.

Terms generally inform the Applicant that all trades must be placed in a cash account and full payment received by settlement date usually three business days after trade execution and that trades cannot be placed on margin. Regarding an Applicant's 1 signature, an E-signature may be used in place of an original signature if the Applicant 1 selects to accept the electronic submission of their name as their signature.