Options trading firms risk disclosure

The Association believes that this language may actually encourage people to continue day trading in hopes that results will improve with time and experience. February 18, 2000, the National Association of Securities Dealers, Inc. The Association, however, believes that the definition included in the rule filing would not benefit from the inclusion of this additional language. The Association believes that any abuses of the delivery requirement could be detected during routine examinations. ETA, however, proposes alternative language in three sections of the disclosure statement. NASD Regulation has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. Its membership consists of the securities administrators in the 50 states, the District of Columbia, Canada, Mexico and Puerto Rico.

Lastly, NASAA suggests that a principal of the firm sign the statement. NASD Regulation believes that this language is an improvement over the language proposed by the NASD. The Association does not believe that such individual solicitations alone would trigger application of proposed Rules 2360 and 2361. Original Notice, in the Federal Register. There does not, however, appear to be any reliable statistical evidence that supports such an assertion. Proposed Rule Change by the National Association of Securities Dealers, Inc.

Federal Register on the Original Notice. The purpose of the disclosure statement, however, is to highlight for customers the unique risks posed by their engaging in day trading. The change is not the product of any of the comment letters. Of the 39 comment letters received, approximately 13 were in favor of the proposed rule change, 8 supported risk disclosure only, 12 were opposed to the proposed rule change, and 6 expressed no opinion or addressed broader issues. McFarland, Deputy Secretary, SEC, dated October 22, 1999. In attempting to profit through day trading, you must compete with professional, licensed traders employed by securities firms. In addition to the specific questions for which the Commission solicited input, the commenters expressed their views on a variety of other issues. This approach would protect against a firm posting the disclosure statement in a remote place on its Web site, and claiming that it was delivered to all customers in such manner. After considering this most recent set of comments, the Association is proposing Amendment No. This factor should be considered as part of the total mix in making the appropriateness determination.

Notice of Filing of Amendment No. NASAA is an international organization of securities regulators devoted to investor protection. The Association rejects this recommendation because it incorrectly assumes that there will be earnings. In the Original Notice, the Commission requested comment on whether the proposed disclosure statement is adequate. North American Securities Administrators Association, Inc. ETA, however, is concerned with how such a requirement would apply to entities such as hedge funds. If the firm opens the account but later knows that the customer is day trading, the firm would then be required to approve the account for day trading. After considering the comments, NASD Regulation concluded that it is sufficient for firms to have written procedures in place for delivery of the document and to be able to identify those procedures to any examiners. Further, in response to the rule filing, NASAA argues that a requirement to deliver a disclosure statement should apply to all parties whose funds are being handled by third parties. Other commenters argued that the customer should not be required to sign or otherwise acknowledge receipt of the disclosure statement.

Day trading requires knowledge of securities markets. As part of the account approval process, the firm would be required to make a threshold determination that day trading is appropriate for the customer. The NASD options rules set forth obligations that members must fulfill before conducting certain forms of options trading. Act 13 in that the proposed rule change is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest. This, however, is not necessarily true if firms are recommending strategies rather than specific securities. ETA also proposes alternative language to two other sections of the proposed disclosure statement. The member must provide with each filing the anticipated date of first use.

Association received 39 comment letters. Each of these commenters represents a group of interested parties. NASAA continues to believe that the proposed rules should apply to both new and existing accounts. Again, NASAA and ETA expressed the view that customers should be required to acknowledge in writing that they have read and understand the statement. SIA brings together the shared interests of more than 740 securities firms. In the rule filing, NASD Regulation revised the proposed disclosure statement to include the additional key point that day trading generally is not appropriate for persons of limited resources and limited investment or trading experience and low risk tolerance. Rules 2360 and 2361 would apply to new customers only.

The rule filing explained that the Association believes that this definition includes those instances where an individual regularly transmits one or more purchase and sale transactions in a single day. SIA believes that obligations under the proposed rules should not arise in situations where there are no general promotional efforts by firms. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. Regulatory Organizations; Notice of Filing of Amendment No. In response to these comments, in Amendment No. In its Original Notice with the Commission, NASD Regulation included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The total daily commissions that you pay on your trades may add to your losses or significantly reduce your earnings. The Commission received three comment letters in response to the Original Notice. Rule 2361 to the customer. This comment period expired on October 12, 1999.

However, firms may not promote day trading through individuals in an effort to circumvent the rules. Association is modifying proposed Rule 2360 to incorporate an additional principle from the options rules. Among other events, you may experience losses due to: system crashes during both peak and low volume periods; the loss of money of orders on both SOES and SelectNet; and, delayed, conflicting and inaccurate confirmations on orders or cancellations which you initiate. The definition of day trading in the proposed Rule 2361 disclosure statement is being changed to conform with the definition as it appears in the text of proposed Rule 2360. Association is revising proposed Rule 2361 to require firms to deliver the disclosure statement to each customer individually, by mail or electronic means, prior to opening the account. NASAA contends that the disclosure statement should state that persons trading for others may need to register as investment advisers. Below is the text of the proposed rule change, as amended. All submissions should refer to File No. The firm and its clearing broker rely upon sophisticated computer software and hardware to execute transactions, which are subject to failure due to a variety of factors.

Accordingly, the Association continues to believe that it struck the appropriate balance in the rule filing. Items I, II, and III below, which Items have been prepared by NASD Regulation. Day trading may require you to trade your account aggressively, and you may pay commissions on each trade. The Association is not proposing to require customers to sign the disclosure statements. The comment period expired on May 31, 1999. Copies of such filing will also be available for inspection and copying at the principal office of the NASD. Further, in Amendment No. In addition, if a principal or officer of the firm is aware that brokers in the firm are soliciting customers for day trading, then the firm will be deemed to be promoting day trading. Proposed new language from Amendment No. Both ETA and NASAA expressed the view that it was appropriate to require a firm to retain a copy of the disclosure document with an acknowledgment of its receipt by the customer. The Commission is publishing this notice to solicit comments on Amendment No. Finally, in Amendment No. ETA supports the concept of a risk disclosure statement.

ETA disagrees with the concept that day trading is not appropriate for someone of limited resources and limited investment or trading experience. The comments sent to the Commission are summarized by issue below. SIA rule language is a modified version of the language proposed in the Original Notice. As described in the Original Notice and Amendment No. NASD Regulation is proposing to amend the NASD rules to include new Rules 2360 and 2361. In this section, ETA recommends the Association include a discussion on the difficulty in earning money during the first three to five months of day trading. ETA does not believe that the appropriateness determination for day trading is either useful or necessary.

NASD Regulation does not believe that the proposed rule change, as amended, will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. Commission as the Original Notice. On balance, the Association believes that the provision is workable and not overly burdensome. Association, shall be withheld from use until any changes specified by the Association have been made or, if expressly disapproved, until the alternative disclosure statement has been refiled for, and has received, Association approval. NASAA was the only commenter to respond to this question. Investment Companies Regulation Department.

In addition to describing the proposed amendments, the discussion below clarifies some issues raised by the commenters. The disclosure statement lists several factors that a customer should consider before engaging in day trading, including that the customer should be prepared to lose all of the funds that he or she uses for day trading, and that day trading on margin may result in losses beyond the initial investment. Day trading may result in your paying large commissions. Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act. Firms, however, working with counsel, if necessary, can reasonably determine whether a sufficient amount of time has passed to remove a firm from coverage of the rules. Copies of the comment letters and a brief summary of the comment letters have been provided to the Commission. Short selling as part of your trading method may also lead to extraordinary loses, because you may have to purchase a stock at a very high price in order to cover a short position.

Prop trading often involves aggressive trading, and generally you will pay commissions on each share traded. You should consider the following points before engaging in proprietary trading. Associated Person of T3 Trading Group, LLC. The writer of an uncovered call may incur large losses if the value of the underlying security exceeds the exercise price; and the writer of an uncovered put may incur large losses if the value of the underlying security declines below the exercise price. When you prop trade with funds borrowed from a firm, you can lose more than the funds you originally placed at risk. If you do not have a license, T3 will sponsor traders to get a Series 57 license. You should be prepared to lose all of the funds that you use for prop trading. The total daily trading fees that you pay on your trades will add to your losses or significantly reduce your earnings. Proprietary trading requires knowledge of securities markets.

You should have appropriate experience before engaging in prop trading. Prop trading can also lead to large and immediate financial losses. In attempting to profit through prop trading, you must compete with other professional, licensed traders employed by securities firms as well as other computer trading programs. There are special risks associated with uncovered option writing that expose the trader to potentially significant losses. The method is only for the knowledgeable trader who understands the risks, has the financial capacity and willingness to incur potentially substantial losses, and has sufficient liquid assets to meet applicable margin requirements. There is no guarantee that the trader will be successful, and these capital contributions may be lost.

Series 56, 57 or 7 license. Proprietary trading will generate substantial trading fees, even if the per share cost is low. Proprietary trading can be extremely risky. Option trading has special risks and is not suited for everyone. Proprietary trading generally is not appropriate for someone of limited resources and limited investment or trading experience and low risk tolerance. You should be wary of advertisements or other statements that emphasize the potential for large profits in prop trading. Uncovered option writing is not suitable for everyone. Be cautious of claims of large profits from proprietary trading. Proprietary traders are not customarily paid any salaried compensation.

Proprietary traders are often required to make initial capital contributions in order to become a Class C Member of T3 Trading Group, LLC. Class C interests in the firm. Proprietary trading on margin or short selling may result in losses beyond your initial investment. In addition, all capital deposited to a proprietary trading account cannot be withdrawn for twelve months from the date of deposit. DAY TRADING CAN BE EXTREMELY RISKY. FOR THE RESULTS OF TRADING IN MY ACCOUNT. No representation is being made that any trading account will or is likely to achieve profits or losses similar to those shown, in fact, there are frequently sharp differences between hypothetical trading performance results and the actual results subsequently achieved by any particular trading program. Thus, many of the risks applicable to trading the underlying asset apply equally to the future applicable to such asset.

It also means that a relatively small movement can lead to a proportionately much larger movement in the value of your investment, and this can work against you as well as for you. Only experienced persons should contemplate writing uncovered options, and then only after securing full details of the applicable conditions and potential risk exposure. Markets also do not always guarantee exact fills. One of the limitations of hypothetical trading performance results is that they are generally prepared the benefit of hindsight. If you fail to do so as required, your position may be closed or liquidated in the same way as a futures position. Futures transactions have a contingent liability and investors should be aware of the implications of this.

Past results of NetPicks are not indicative of future performance. These may involve greater risk than other options. However, if investors buy a call option on a futures contract and investors later exercise the option, they will acquire the future. Buying options: Buying options involves less risk than selling options because, if the price of the underlying asset moves against you, investors can simply allow the option to lapse. In reality, the results do not represent the track record of the methodology originator or subscribers. This also means there is no guarantee that one applying these methodologies would have the same results as posted.

The monthly and composite annual results should be viewed as hypothetical. Futures Transactions in futures involve the obligation to make, or to take, delivery of the underlying asset of the contract at a future date, or in some cases to settle the position with cash. Periods of fast markets can cause greater degrees of slippage and less than ideal fills. Investors may be liable for margin to maintain their position and a loss of money may be sustained well in excess of the premium received. It may be difficult to assess its value or for the seller of such an option to manage his exposure to risk. This can lead to greater risk. Writing options: If investors write an option, the risk involved is considerably greater than buying options.

Futures are also exposed to liquidity risk. Two way prices are not usually quoted and there is no exchange market on which to close out an open position or to effect an equal and opposite transaction to reverse an open position. There can be no guarantee that your account will always be able to enter and exit the programs ideal entry or exit point. They carry a high degree of risk. There are many different types of options with different characteristics subject to the following conditions. In general, the value of a future depends upon price movements in the underlying asset. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical forex trading performance results, and all of which can adversely affect actual forex trading results. By writing an option, investors accept a legal obligation to purchase or sell the underlying asset if the option is exercised against them however far the market price has moved away from the exercise price.

The maximum loss of money is limited to the premium, plus any commission or other transaction charges. Stocks, Futures, Forex, and Options trading involves risk and is not appropriate for all investors. WOULD RESULT IN A FUTURES OR FOREX POSITION. SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. If you do not have the extra capital that you can afford to lose, you should not trade. ADVERSELY AFFECT ACTUAL TRADING RESULTS.

THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. OF FINANCIAL RISK IN ACTUAL TRADING. FINANCIAL CONDITION IN DECIDING WHETHER TO TRADE. WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS. LIKELY TO, ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. ONLY GENUINE RISK FUNDS SHOULD BE USED.

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Day trading is a speculative, high risk activity and is not suitable for many investors. DAYTRADING involves high risks and YOU can LOSE a lot of money. Therefore, TOT recommends that you not fund day trading activities with retirement savings, student loans, second mortgages, emergency funds, funds set aside for purposes such as education or home ownership, or funds required for current income to meet your living expenses since you could lose all such funds in day trading. Traders agree to consult with a registered investment advisor prior to making any trading decisions. This web site Turbooptiontrading. TOT reiterates that day trading can lead to large and immediate financial losses. Our signals are not perfect or guaranteed, and members would be taking the same risks as mentioned above by buying or selling short based on TOT Traders Team signals as they would by buying or selling short based on anything else, be it research, advice, rumor, news, or any other possible motivation to invest in a security.

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