Merrill A Bank of America Company Merrill A Bank of America Company Open an account Login Open Menu bar Find answers to common questions at MerrillSchedule an Open an accountwith Merrill Cash accounts, unlike margin accounts, require transactions to be paid for with available funds by the time the trade " settlesSelect to open or close help pop-upSelect to close help pop-up ×What is settled cash?Settlement is when a transaction is finalized and the cash or securities are formally in your account. Most trades settle two days after they are placed. This is sometimes called "T+2," or trade date plus two business days. Settled cash includes: Deposited funds, such as a check or a wire, once the transaction postsCash from the sale of securities that have been paid for in fullSelect toCheck your "settled cash buying power" on the Balances page.End of help pop-up content ." If you pay for a purchase with cash that is yet to settle — or the account does not hold enough cash — a trade violation may occur. If that happens, restrictions may be placed on your account. A freeride occurs when you sell a security in a cash account before sufficient funds have settled to cover that purchase. This could be due to using proceeds from a sale before settlement, or from simply exceeding available funds. Either way, if you've sold the shares before paying for them, you've committed a freeride violation. Learn moreabout freeride violations Consequences: Your account will be restricted to funds-on-hand trading for 90 days, meaning you can only buy securities with settled funds. Example 1 For illustration purposes only Your account has $1,000 in total cash available. Monday 10 am: You purchase 100 shares of ABC stock for a total cost of $2,000. You need to deposit an additional $1,000 before the purchase settles on Tuesday. Monday 11 am: You haven't deposited the $1,000, but you sell the 100 shares of ABC stock for total proceeds of $2,500. Tuesday: Your account is now restricted for 90 days due to freeriding because you sold the security without bringing in funds to pay for it. The restriction may be eligible to be removed if the $1,000 deposit is made by Thursday (purchase date + three business days). Example 2 For illustration purposes only Your account has $1,000 in total cash available. Monday 10 am: You sell 100 shares of ABC stock for a total of $2,000. Monday 11 am: You buy 100 shares of XYZ stock for a total cost of $3,000. You then sell the 100 XYZ shares for $4,000. Tuesday: Your account is now restricted for 90 days due to freeriding because you sold a security bought with unsettled funds. Had you waited until Tuesday to sell the XYZ shares (the date your initial sale of ABC would settle), there would be no violation. The restriction may be eligible to be removed if the required $2,000 deposit is made by Thursday (purchase date + three business days). A technical violation occurs when you purchase a security and then sell a different security on a later date to cover that purchase. Learn moreabout technical violations Consequences: If you incur three technical violations in a rolling 12-month period, your account may be restricted to funds-on-hand trading for 90 days. This means you can only purchase securities with settled funds. Example For illustration purposes only Your account has $1,000 in total cash available. Monday: You purchase 100 shares of ABC stock at $100 per share for a total cost of $10,000. You must deposit an additional $9,000 in cash before the purchase settles. Tuesday: You haven't deposited the $9,000, but sell 90 shares of XYZ stock for $9,000 to cover the purchase. Wednesday: As you sold your shares of XYZ to pay for your purchase of ABC, you've incurred a technical violation. The violation can be canceled if a deposit of $9,000 is made by Thursday (trade date + three business days). A technical violation can be removed if cash is deposited no later than two business days from the purchase settlement. Selling a security that isn't held in your account is also known as a sale-not-long violation. This is often the result of mistakenly placing a trade in the wrong account. If you realize that you've placed a trade in the wrong account, contact us as soon as possible. A sale-not-long violation is incurred once you close out the position you sold in error. Learn moreabout sale-not-long violations Consequences: If you have a sale-not-long violation that results in an unpaid purchase obligation, or if you incur any sale-not-long violations three times in a rolling 12-month period, your account will be restricted to funds-on-hand trading for 90 days. This means you can only purchase securities with the settled funds "on hand." Example For illustration purposes only You have two cash accounts, Account A and Account B. You hold 100 shares of ABC stock in Account A and have entered a good-till-cancel order to sell 100 shares of ABC in Account A. Monday: You move all your shares of ABC from Account A to Account B and neglect to cancel your sell order. The sell order executes in Account A, which no longer holds the shares. You receive $5,000 in proceeds for the sale. Wednesday: You realize the ABC shares sold in the wrong account. This account has no cash other than the $5,000 in proceeds, so you use these proceeds to buy back 100 shares of ABC to correct your mistake. Thursday: This action results in a sale-not-long violation because Account A had no cash other than the erroneous sale proceeds and you didn't move the shares back from Account B. A sale-not-long violation can be removed if the required shares are deposited within two days of settlement of the sale. With a margin account, you can borrow against the value of eligible securities to buy additional securities, protect yourself from overdrafts and cover unexpected expenses. Margin increases your buying power, but it also exposes you to the potential for larger losses. A day trade call occurs when you exceed your day tradeSelect to open or close help pop-upSelect to close help pop-up ×What is a day trade?A day trade is an opening and closing transaction placed during the same trading day (including extended hours). This includes: Buying a security long and selling the same security on the same trading dayShorting a security and buying the same security to cover in the same trading dayBuying a security long and selling the same security short on the same trading dayShorting a security and buying the same security long on the same trading dayEnd of help pop-up content buying power. If you're a pattern day traderSelect to open or close help pop-upSelect to close help pop-up ×What is a pattern day trader (PDT)?If you execute 4 or more day trades within 5 consecutive business days, or have a history of pattern day trading, you will be classified as a pattern day trader. Financial Industry Regulatory Authority (FINRA) rules require firms to monitor client accounts engaged in day trading. Pattern day trading accounts are subject to a set of special margin rules that relate specifically to that practice. In addition to standard margin rules, day trade buying power is calculated and monitored, and the minimum equity threshold for day trading is increased to $25,000. Day trade buying power is based on the previous day's firm maintenance excess (FME).End of help pop-up content , you'll be restricted if the call is not met. If you're a non-pattern day trader, you won't be restricted until incurring three unmet day trade calls within a 12-month period. You may buy and sell multiple times per day, as long as you don't open positions greater than your day trade buying powerSelect to open or close help pop-upSelect to close help pop-up ×What is day trade buying power?Your day trade buying power is equal to the funds available in your pattern day trading margin account to place day trades. It is based on the maintenance requirement of the security being traded, and varies by product type and price per share. You'll only be able to see it online if your account has pattern day trader status. Day trade buying power is based on prior-day balance figures and can be found on the Balances screen.End of help pop-up content that you close on the same day. Learn moreabout day trade violations Consequences: Non-pattern day trader (Non-PDT) Pattern day trader (PDT) First four business days Fifth business day Example 1 - Buying and selling a position above your buying power For illustration purposes only Your account has $20,000 in day trade buying power At 10 a.m., you purchase 100 shares of XYZ stock for $30,000. At 11 a.m., you sell the shares for $31,000. This would trigger a day trade call because the value of your day trades exceeded your day trade buying power by $10,000. Because of this, you can't trade the full position without incurring a day trade call. However, you can sell a portion of the position. At a purchase price of $300/share, the number of shares sold cannot exceed 66 without exceeding the $20,000 day trade buying power ($20,000 ÷ $300 = 66.66 shares). Example 2 - The effect of selling shares on your day trade buying power For illustration purposes only Your account has $20,000 in day trade buying power At 10 a.m., you sell 100 shares of XYZ stock for $30,000. At 11 a.m., you buy 100 shares of ABC stock for $25,000. At 12 p.m., you sell 100 shares of ABC for $30,000. You've incurred a day trade call because you exceeded your day trade buying power by $5,000. The sale of XYZ does not increase your day trade buying power, since it is based on start-of-the-day availability. At a purchase price of $250/share, the number of shares sold cannot exceed 80 without exceeding your $20,000 day trade buying power ($20,000 ÷ $250 = 80 shares). Selling securities already held in your account increases your buy and hold buying power but does not affect your day trade buying power. You may bring in cash or marginable securities at any time you are restricted to resolve a day trade violation. A liquidation violation occurs when you have a Regulation T callSelect to open or close help pop-upSelect to close help pop-up ×What is a Regulation T call?A Regulation T Call occurs when required margin under Regulation T exceeds the value of your Special Memorandum Account (SMA). End of help pop-up content and maintenance callSelect to open or close help pop-upSelect to close help pop-up ×What is a maintenance call?A maintenance call is when the value of your marginable securities minus your margin debit balance falls below the account margin maintenance requirement. This requirement is usually 30% for fully marginable equities, but it can be bigger due to higher margin requirements. In order to meet a maintenance call, you might have to liquidate a position, or deposit more cash or securities into your margin account. End of help pop-up content at the same time, and sell securities instead of depositing cash or marginable securities in order to meet the Regulation T call. Learn moreabout liquidation violations Consequences: Your account won't be restricted for a single liquidation violation. If you incur three liquidation violations in a rolling 12-month period, your account will be restricted for 90 days. You'll only be able to trade with the lower of available Special Memorandum Account (SMA)Select to open or close help pop-upSelect to close help pop-up ×What is a Special Memorandum Account?Your Special Memorandum Account (SMA) shows the amount of equity you have in excess of the amount required by Regulation T. End of help pop-up content or Firm Maintenance Excess (FME)Select to open or close help pop-upSelect to close help pop-up ×What is firm maintenance excess?Firm maintenance excess is the amount of equity in your account in excess of the maintenance requirement. Because it is based on the closing value of your portfolio, it may factor into how much you can trade and withdraw. Firm maintenance excess is the amount of equity in your account in excess of the maintenance requirement. Because it is based on the closing value of your portfolio, it may factor into how much you can trade and withdraw. End of help pop-up content and cash. Example For illustration purposes only You have a margin account with a Regulation T call of $10,000 and a maintenance call of $16,000. You sell 500 shares of marginable ABC stock for $60,000. This releases $30,000 towards the Regulation T call and $18,000 towards the maintenance call which covers both calls. This is a violation because both calls were active at the same time and satisfied by the sale. To avoid the violation, you'd need to first deposit $10,000 to satisfy the Regulation T call. This partially covers the maintenance call as well, reducing the call amount to $6,000. You can then transfer $6,000 cash to your account or sell $20,000 in marginable securities to cover the maintenance call. A liquidation violation can be canceled if cash or securities are deposited to satisfy both the maintenance call and the Regulation T call before the calls were originally due. Footnote asterisk* This is not an exhaustive list of ways you could incur a violation. When you purchase securities, you may pay for the securities in full, or if your account has been established as a margin account with the margin lending program, you may borrow part of the purchase price from Merrill. If you choose to borrow funds for your purchase, Merrill's collateral for the loan will be the securities purchased, other assets in your margin account, and your assets in any other accounts at Merrill. If the securities in your margin account decline in value, so does the value of the collateral supporting your loan, and, as a result, we can take action, such as to issue a margin call and/or sell securities in any of your accounts held with us, in order to maintain the required equity in your account. If your account has a Visa® card and/or checks, you may also create a margin debit if your withdrawals (by Visa card, checks, preauthorized debits, FTS or other transfers) exceed the sum of any available free credit balances plus available money account balances (such as bank deposit balances or money market funds). Please refer to your account documents for more information. Before opening a margin account, you should carefully review the terms governing margin loans. For Individual Investor Accounts, these terms are contained in the Margin Lending Program Client Agreement. For all other accounts, the terms are in your account agreement and disclosures. It is important that you fully understand the risks involved in using margin. These risks include the following: If you have any questions or concerns about margin and the margin lending program, please contact the Merrill Investment Center at 855.332.5920. MAP5822296-08022024 Investing in securities involves risks, and there is always the potential of losing money when you invest in securities. Asset allocation, diversification, and rebalancing do not ensure a profit or protect against loss in declining markets. Merrill, its affiliates, and financial advisors do not provide legal, tax, or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions. This material is not intended as a recommendation, offer or solicitation for the purchase or sale of any security or investment strategy. Merrill offers a broad range of brokerage, investment advisory (including financial planning) and other services. Additional information is available in our Client Relationship Summary (PDF). Merrill Lynch, Pierce, Fenner & Smith Incorporated (also referred to as "MLPF&S" or "Merrill") makes available certain investment products sponsored, managed, distributed or provided by companies that are affiliates of Bank of America Corporation ("BofA Corp."). MLPF&S is a registered broker-dealer, registered investment adviser, Member Securities Investor Protection (SIPC) popup and a wholly owned subsidiary of Bank of America Corporation ("BofA Corp"). Merrill Lynch Life Agency Inc. (MLLA) is a licensed insurance agency and wholly owned subsidiary of BofA Corp. Banking products are provided by Bank of America, N.A. and affiliated banks, Members FDIC and wholly owned subsidiaries of Bank of America Corporation. Investment products offered through MLPF&S and insurance and annuity products offered through MLLA: Privacy|Security|Glossary|Advertising practicespopupAdvertising Practicespopup © 2024 Bank of America Corporation. All rights reserved. 4326521
appointmentwith MerrillCash account trade violations
Tips to avoid trade violations in a cash account
Types of cash account violationsFootnote asterisk*
Freeride violations
Steps to resolve freeride violations
Tips to avoid freeride violations
Technical violations (cash liquidation violations)
Steps to resolve technical violations
Tips to avoid technical violations
Sale-not-long violations
Steps to resolve sale-not-long violations
Tips to avoid sale-not-long violations
Margin account trade violations
Tips to avoid trade violations in a margin account
Types of margin account violationsFootnote asterisk*
Day trade violations
If your non-PDT account is restricted due to day trading, you'll lose your ability to exceed your day trade buying power for opening trades online. You may bring in cash equal to the amount by which you exceeded your day trade buying power or deposit marginable securities to have the restriction canceled. If you wish to deposit marginable securities, contact us.
If you incur a day trade call, your account will be restricted to twice your start-of-the-day Firm Maintenance Excess plus cash for opening transactions. You'll have four business days to address the call before your account will be further restricted.
You may bring in cash equal to the amount by which you exceeded your day trade buying power or deposit marginable securities to have the restriction canceled. If you wish to deposit marginable securities, contact us.
Should the four-day window elapse and you do not take action to resolve the call, your account will be further restricted to your start-of-the-day Firm Maintenance Excess (FME) and cash for opening transactions.
You can still bring in the cash or securities to have the restriction removed. If you wish to make the deposit after the first four business days, contact us.
Steps to resolve day trade violations
Tips to avoid day trade violations
Liquidation violations
Steps to resolve liquidation violations
Tips to avoid liquidation violations
Are Not FDIC Insured Are Not Bank Guaranteed May Lose Value Are Not Deposits Are Not Insured by Any Federal Government Agency Are Not a Condition to Any Banking Service or Activity
Cash account violations tab 1 of 2Margin account violations tab 2 of 2
See Also
good-faith margin definition · LSDataFidelity.com Help - Trading Mutual FundsRestrictions & Violations HelpCash vs. Margin Account - Firstrade