The above is from Reuters.
Tom
Doug Henwood wrote:
> [Day-trading firms encourage accounts in the black to lend money to
> accounts in the red. Some of the people that Slay Trader shot were
> people he'd borrowed money from.]
>
> Wall Street Journal - August 9, 1999
>
> PROBE OF DAY-TRADING FIRMS FINDS
> 75% OF SURVEYED ACCOUNTS IN THE RED
>
> By Rebecca Buckman
> Staff Reporter of The Wall Street Journal
>
> A random sample of brokerage accounts at one Massachusetts
> day-trading concern found that nearly three-quarters of them weren't
> profitable, a group of state securities regulators is expected to
> announce Monday.
>
> The finding is part of a wide-ranging report on day trading to be
> released Monday by the North American Securities Administrators
> Association at a news conference in Washington. A special NASAA task
> force, led by David Shellenberger, chief of licensing for the
> Massachusetts Securities Division, has been working on the report for
> several months, and the group found an outside expert to analyze the
> accounts at the Massachusetts firm, people with knowledge of the
> report say. One of those people said the firm was All-Tech Investment
> Group Inc. of Montvale, N.J.
>
> Mr. Shellenberger's office has been especially aggressive in cracking
> down on what regulators call questionable practices at day-trading
> concerns, brokerages that enable investors to make rapid-fire stock
> trades to capture tiny profits on each transaction. One of
> regulators' chief concerns: whether investors realize how much
> trading profits can be hurt by commission costs, since day-trading
> firms charge customers by the transaction. Day traders can make
> scores of trades a day.
>
> The report's release comes about a week and a half after an Atlanta
> day trader, Mark O. Barton, went on a shooting rampage and killed 12
> people after racking up big losses at two brokerage firms. Though Mr.
> Barton's actions can't be blamed just on day trading, his killing
> spree began two days after he received a margin call to put up more
> money at one company, Momentum Securities Inc. of Houston. Mr. Barton
> had a loss of $105,000 in less than two months of trading at
> Momentum. Before that, he racked up about $400,000 in losses in a
> year at All-Tech.
>
> Trading on margin, or with borrowed money, is expected to be one of
> the main topics addressed in the NASAA report. State and federal
> regulators have expressed concerns that some customers of day-trading
> shops may be trading beyond their means, and that some borrowers and
> lenders may not understand the risks associated with "customer to
> customer" loans to cover margin calls. Mr. Barton had borrowed money
> from fellow traders at All-Tech in the year he traded there, All-Tech
> Chief Executive Officer Harvey Houtkin has said, and he shot some of
> those traders during his killing spree.
>
> The people with knowledge of the regulatory report say it also will
> address allegedly deceptive marketing by day-trading companies;
> issues of "suitability," or whether day trading is a suitable
> vocation for many investors; and the practice of day traders managing
> accounts for others. Such third-party trading is questionable, some
> regulators say, as they feel traders should be registered as
> investment advisers to trade other people's money.