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Can't they use that cash to fund my own buys

Is this how people really think the markets work? If it is, it's no wonder that a lot of retail investors will be taken to the cleaners. What you just suggested is so illegal that no professional trader would have had the nerve to even mention it.

I think it might be helpful if RH had some kind of trading tutorial that maybe went through the mechanics and rules so that people joining would have a better understanding. What I've been reading the last few days betrays a massive lack of understanding about how a lot of this works.



> What you just suggested is so illegal that no professional trader would have had the nerve to even mention it.

Why is it illegal?

At least from the outside, it doesn’t make sense. If I transfer money to RH to buy stocks, I expect that money to be used to buy the stock, when I buy the stock, whatever that process might entail. So if my purchase requires collateral because settlement happens later, then I would expect for my money to be used as collateral for my purchase and then be fully paid out once settlement occurs. Why wouldn’t it be that way? (if I’m not borrowing money from anyone).


They're not allowed to use client money as collateral. They have to use their own cash as collateral.


Got it, but what is the reasoning for that rule to be there? Why was that rule/law created?




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