how to avoid three day trading rule?

i have a cash account and have to wait three days after a trade for the funds to settle. is there anyway i can avoid this? do margin accounts eliminate this problem? i like using my own cash and do not want to trade with loaned out money. thanks

Public Comments

1. I am going to assume you have a Zecco trading account as they are one broker I am aware of with the T+3 rule.

Yes, applying for a margin account will fix this, and no you do not have to use margin if you do not want to. The funds will simply settle immediately instead of in 3 days.

ex:

You have 1,000 cash and 1,000 invested in market.
You sell the 1,000 invested. With a margin account you have access to all 2,000 immediately. You will not be charged marginal interest. Use additional money and yes they will charge you margin.

Watch out for the buying power number. If you sold your 1,000 and now have 2,000 cash, it will show your buying power is like 4,000. 2,000 of that is on margin.

2. T+3 settlement is mandated by the SEC so there is no avoiding it for cash transactions, its a regulatory requirement not a firm issue. The only way to avoid it is to open a margin account which would be treated as a line of credit and has a number of ramifications on how you trade because once the trade is made on margin it doesn't matter if the cash settles to cover the trade the line of credit is already established and you may be subject to margin calls going forward.
http://www.sec.gov/investor/pubs/tplus3.htm