Cash account rules

The credit extension provisions of the Federal Reserve Board’s Regulation T govern an investor’s use of a cash account to purchase securities. 

Please be aware, eToro options does not support day trading in cash accounts. You can make purchases without limit as long as settled funds are used for such purchases. Any or all of the purchases may be sold the same day but proceeds from such sales may not be used for further purchases until those funds are settled. Options settle in 1 business day and stocks settle in 2. 

There are several potential violations of Regulation T, outlined below, which investors operating in a cash account should be aware of.

Good Faith Violations

• A Good Faith Violation occurs when you purchase a security and subsequently sell it prior to having paid for the initial purchase with settled funds. 
• If you incur 3 Good Faith Violations within a 12-month period, your account will be restricted. This means you will only be able to purchase securities with fully settled funds for a 90-day period. 

Cash Liquidation Violations

• A Cash Liquidation Violation occurs when you purchase a security and pay for it by selling fully paid securities after the purchase date. This is a violation because industry regulations require you have fully settled funds available to pay for the security purchase upon settlement. 
• If you incur 3 Cash Liquidation Violations within a 12-month period, your account will be restricted. This means you will only be able to purchase securities with fully settled funds for a 90-day period. 

Free Riding Violations

• A free riding violation occurs when you purchase a security and pay for the transaction by selling the same securities. This constitutes a violation of Regulation T as the stock is not fully paid for prior to selling it. 
• If you incur 1 Free Riding Violations within a 12-month period, your account will be restricted. This means you will only be able to purchase securities with fully settled funds for a 90-day period.