TradePortal Securities

Note *** Important Margin Information…

The NASD has enacted new regulations for trading accounts. Please take time to become familiar with these regulations, as they will affect the clearing procedures of your account.
The following is a description of these new rules, as they apply to your TradePortal account.

Cash Accounts

Cash Accounts for Options and Equities are handled the same way. They are subject to 'Aggregate Sum Accounting', which means that the sum total of all your purchases will be measured against your buying power. In other words, if you have $20,000 cash ($20K Buying Power in an all cash account), and you buy (and then sell) $20K of stock, you have then used up all of your buying power for the day - and will not be able to open any more positions until the following day. So, you can Day Trade in a cash account, but you are limited to paying 100% for each position, subject to Aggregate Sum accounting.

Aggregate Sum Accounting in a Cash Account:

Will be based on the aggregate sum of all opening trades. Note: This is a change from the old way of accounting. Here is an example of the new 'Aggregate Sum' calculation:
Today, Joe Trader's Cash Account has a $15,000 balance (which is $15,000 buying power). He does the following trades:

Buy	300	ABCD	@	Total	$6,000
Sell	300	ABCD	@	Total	$6,300
Buy	200	WXYZ	@	Total	$4,000
Sell	200	WXYZ	@	Total	$3,800

The 'aggregate sum' of the above trading activity would be $10,000. So, Joe may purchase up to $5,000 more worth of securities today. If he did that, he would have used all available buying power for the day. Any additional purchases after that would generate a call for funds.
The thing to remember is that in a cash account, all trades must be paid for in full, on an aggregated basis.

Margin Accounts

There are several changes to margin accounts. The broadest change is that there will now be two types of margin accounts - Standard Margin Accounts and Pattern Day Trader Accounts.
These two types of accounts operate differently. If you plan to day trade frequently, the new regulations require that you have a 'Pattern Day Trading' (PDT) account. It is very important that you review the definition of 'Pattern Day Trading'.

Standard Margin Accounts:

In Standard Margin Accounts, you may not make a habit of day trading. If you do show a pattern of day trading, as required by the NASD your account will be classified as a 'Pattern Day Trading Account' (PDTA) and your account will be subject to additional requirements, described below in 'Pattern Day Trading Accounts'. The following regulations apply to Standard Margin Accounts:

Buying Power: Standard Margin Accounts will now effectively have 4 to 1 available Intraday Buying Power, so long as they do not trade enough to qualify as a PDT. However, Overnight Buying Power remains the same; that is you must have at least 50% equity in order to hold a position overnight (2 to 1). Keep in mind that Buying Power is established at the beginning of the trading day - and it does NOT change Intraday.

Overnight Holds: Rules are amended, so that the sale of an overnight position is treated as liquidation and the subsequent repurchase of the same security as the establishment of a new position - not a day trade.

So if you hold a position overnight, then close the position out - and then trade the stock again, this trade will be treated as a new position. However, if you then trade the stock again, this time the trade will be treated as a Day Trade, and may generate a call. The old adage 'if you hold it overnight, do not trade it the next day' might be changed to 'If you hold it overnight, do not trade it more than once the next day.'

Cross Guarantees Prohibited: Under the new rules, customers are no longer permitted to meet Margin calls through the use of cross guarantees (another account lends the funds to cover the call).

Calls in a Standard Margin Account:

Trading Calls: When Intraday Buying Power is exceeded by the opening of a position, a 'Trading Call' is generated. The amount of the call will equal 50% of the amount exceeded. Accounts that have incurred Trading Calls will be restricted to 1x Maintenance Excess until the call is met. Please note that funds must be sent in to cover calls - you may not liquidate in order to meet a trading call.

When Intraday Buying Power is exceeded by the opening of a position, a 'Trading Call' is generated. The amount of the call will equal 50% of the amount exceeded. Accounts that have incurred Trading Calls will be restricted to 1x Maintenance Excess until the call is met. Please note that funds must be sent in to cover calls -you may not liquidate in order to meet a trading call.

Due Date for a Trading Call is: Five business days from the trade.

Strikes: If the call is not met within the specified time, it is further restricted to 1 to 1 buying power on an 'aggregated Sum'* basis for 90 days. If the customer incurs another Day Trading call while on restriction, the account is immediately closed and limited to liquidating transactions only.

Aggregate Sum Accounting in Margin Accounts

Once a call has been issued, your buying power will be subject to an alternate calculation. This calculation will be based on the aggregate sum of all opening trades beginning on the trading day after the day trading buying power is exceeded, until the call is met. Here is an example of the new 'aggregate sum' calculation
Today, Joe Trader's account has $15,000 maintenance excess (which is $30,000 buying power; remember, the account is restricted to 1 to 1). He does the following trades:

Buy	300	ABCD	@	Total	$15,000
Sell	300	ABCD	@	Total	$15,300
Buy	200	WXYZ	@	Total	$4000
Buy	300	HIJK	@	Total	$4500
Sell	200	HIJK	@	Total	$2800

The 'aggregate sum' of the above trading activity would be$23,500. So, the account must have at least $23,500 in maintenance excess to execute the above trades ($23,500 divided by 1). He has $15,000 so he generates a Day Trading call for $8,500.

Maintenance Calls: The NYSE/NASD require that customers maintain a minimum amount of equity in their margin account. If the equity should drop below the minimum, a Maintenance Call will be issued requiring the customer to bring the equity back up to the required amount. As a rule of thumb, the requirement for long stock positions is 25% of the current market value, and for a short stock position, the requirement is 30% of the short market value of the security. Keep in mind that these requirements are only rules of thumb; the clearinghouse has the right to impose higher maintenance requirements for specific stocks. If a Maintenance Call is generated in a Standard Margin Account, Customer must bring in enough cash or securities to bring the equity back to house maintenance requirements. Please note that the customer may liquidate positions to meet a maintenance call. Maintenance Calls are due in three business days. If call is not met by the specified due date, the account becomes restricted to 'Cash Available' trades only, until the call is met.

TIP: For long positions, to determine the value that the market price could decline to and still be at minimum maintenance level, multiply the debit balance by 4/3. To determine the value that the short market price could increase to and still be at minimum maintenance level, divide the total credit balance by 1.3. You can find this information in your margin reports.

Reg T Calls: There are no changes to the current policy. A "Reg T" Call is a request for funds to be deposited when a customer exceeds Overnight Buying Power. The current Reg T requirement for both long purchases and short sales of stock is 50% of the total purchase price. Please note that funds must be sent in to meet the call.

Reg T Calls are due in five business days.Funds must be received by the specified date. If funds are not received by the specified date, securities must be liquidated to satisfy the call. (Please note that the firm must liquidate sufficient securities to meet the call.)Funds sent in to meet a call must stay in the account for two business days.

Pattern Day Trading Accounts:

The NASD has enacted special regulations governing 'Pattern Day trading Accounts'. Here is the definition of a Pattern Day Trader:

Any customer who Day Trades* four or more times in five business days, and such activity is more than six percent of that customer's total trading activity for the five-day period, is a Pattern Day Trader, and the
clearing firm must designate the account as a 'Pattern Day Trading Account'. If the 'Day Trades' do not account for more than six percent of total trading activity in that period, the clearing firm will not be required to designate the account as PDT. If the customer opens a standard margin investment account, and later qualifies as a day trader at some point, the account will be immediately re-classified as a PDT account, and therefore be subject to the 'Pattern Day Trading Account' requirements.

*A 'Day Trade' is defined as: The purchase and sale, or the sale and purchase of the same security on the same day in a single account.

Buying Power: Pattern Day Trading Accounts have 4 to 1 Buying Power available Intraday. However, Overnight Buying Power remains the same; that is you must have at least 50% equity in order to hold a position overnight (2 to 1). Keep in mind that Buying Power is established at the beginning of the trading day - and it does NOT change Intraday.

Minimum Funding and Equity Requirement for all PDT accounts:Minimum funding: $30,000. Minimum Equity requirement: $25,000. This requirement is for all PDT accounts, new or not.

Overnight Holds: The sale of an overnight position is treated as liquidation and the subsequent repurchase of the same security as the establishment of a new position - not a day trade. But keep in mind, any other trades in the overnight position will be treated under the old rules. So if you hold a position overnight, then close the position out - and then trade the stock again, this trade will be treated as a new position. However, if you
TradePortal Securities, Inc. - Copyright 2001 7 then trade the stock again, this time the trade will be treated as a Day Trade, and may generate a call. The old adage 'if you hold it overnight, do not trade it the next day' might be changed to 'If you hold it overnight, do not trade it more than once the next day'.

Cross Guarantees Prohibited: Customers are prohibited from covering calls through the use of cross guarantees (another account lends the funds to cover the call).

Calls in Pattern Day Trading Accounts

Calls are the same for Standard Margin Accounts AND Pattern Day Trading Accounts, with one exception: the PDT Maintenance Call.

Maintenance Calls: If a PDT account's equity dips below $25,000, an Equity Maintenance call is generated. The account will be restricted to cash available trades only, on an 'aggregated sum'* basis, until equity is deposited, to bring the account equity back to $25,000. Please note, if the account equity drops below the House Minimum Maintenance requirement, a different maintenance call may be generated as well.

In Pattern Day Trading Accounts, if the PDT account equity does dip below $25,000, an Equity Maintenance Call is generated to bring the account equity back to $25,000. Equity Maintenance Calls are due same day. If call is not met by the specified due date, the account becomes restricted to 'cash available' until the call is met. If a PDT account has equity over $25,000: A Maintenance Call will be generated if the account's equity drops below the minimum house requirement. The NYSE/NASD require that customers maintain a minimum amount of equity in their margin account. If the equity should drop below that minimum, a Maintenance Call will be issued requiring the customer to bring the equity back up to the required amount. As a rule of thumb, the requirement for long stock positions is 25% of the current market value, and for short stock position, the requirement is 30% of the short market value of the security. Keep in mind that these requirements are only rules of thumb; the clearinghouse has the right to impose higher maintenance requirements for
specific stocks.

Maintenance Calls are due in three business days. If call is not met by the specified due date, the account is liquidated to meet the call

TIP: For long positions, to determine the value that the market price could decline to and still be at minimum maintenance level, multiply the debit balance by 4/3. To determine the value that the short market price could
increase to and still be at minimum maintenance level, divide the credit balance by 1.3. You can find this information in your margin reports.

Trading Calls: When Intraday Buying Power is exceeded by the opening of a position, a 'Trading Call' is generated. The amount of the call will equal 50% of the amount exceeded. Accounts that have incurred Trading Calls will be restricted to 1x Maintenance Excess on an Aggregate Sum basis until the call is met. Please note that funds must be sent in to cover calls - you may not liquidate in order to meet a trading call.

Due Date for a Trading Call is: Five business days from the trade.

Strikes: If the call is not met within the specified time, it is further restricted to 1 to 1 buying power on an Aggregate Sum basis for 90 days. If the customer incurs another Day Trading call while on restriction, the account is immediately closed and limited to liquidating transactions only.

Funds must be received by the specified date. If funds are not received by the specified date, securities must be liquidated to satisfy the call. (Please note that the firm must liquidate sufficient securities to meet the call.)
Funds sent in to meet a call must stay in the account for two businesses days.

Call Summary Table

For reference, here is a diagram that summarizes some of the important
information about calls.

Call Type	Action Required	Due Date	all Period Restrictions (Period between generation of the call and Date Call is met).	If Call Not Met by Due Date
Trading Call	Send Funds (cannot liquidate to meet call)	Send Funds (cannot liquidate to meet call)	Buying Power restricted to 1x Maintenance Excess (Aggregate Sum Accounting).	Trading restricted to cash available only on an ' Aggregate Sum' basis until the call is met.
Maintenance Call	Send in Funds/Liquidate/ Market Appreciation	3 Business Days	Cannot add on new positions	Firm must liquidate sufficient amount of securities to meet the call.
PDT Under 25K Maintenance Call	Send in Funds/ Market Appreciation	Same Day	1x Maintenance Excess (Aggregate Sum Accounting).	Trading restricted to cash available only on an ' Aggregate Sum' basis until the call is met..
Reg. T Call	Send in Funds	5 Business Days	None	Firm must liquidate sufficient amount of securities to meet the call.