eToro USA Securities and Alpaca Securities have received no-action relief from SEC staff for brokerage accounts that hold no customer cash, with client funds instead sitting at a bank or money transmitter. The relief sets different capital requirements for each firm and spells out how money must move in and out of the accounts.
eToro USA Securities and Alpaca Securities won no-action relief from SEC staff this week for brokerage accounts that hold no customer cash. Instead, that money sits at a bank or a money transmitter, moving in to cover trades and back out after sales.
Two Different Capital Requirements
The two letters set how much capital each firm needs and how customer money may move. eToro's US broker-dealer, which introduces accounts to a clearing firm, may run the model with minimum net capital of $5,000. Alpaca, which carries and clears accounts itself, must keep a minimum of $250,000 or 2% of aggregate debit items, whichever is greater.
Lowenstein Sandler, the law firm that filed both requests, said the accounts can draw on customer bank, crypto or remittance accounts held with affiliated or third-party providers. It said the structure can ease foreign exchange conversion and help foreign customers reach US markets.
How Money Moves Between Accounts
The outside account can sit at a bank or at a state-licensed money services business registered with FinCEN, and customers must open one as a condition of getting the brokerage account. In the example set out in eToro's request, a customer buying one $100 share also instructs the money transmitter to send $100 to the carrying firm, with the share credited once the trade settles the next business day.
After a sale, proceeds go back to the external account under a standing authorization the customer signs. Alpaca said it would send them before the close of the next business day and agreed to exchange reconciliation reports with the money transmitter daily.
A Staff Position, Not a Rule
Raymond Lombardo, acting associate director in the SEC's Division of Trading and Markets, signed both letters. According to Finance Magnates: "based strictly on the facts and circumstances stated in your Letter." Customer agreements must state that money sent to the external account is not held in the brokerage account and is therefore not protected by the Securities Investor Protection Corporation.
The staff said it took no view on other federal, state or foreign laws or on self-regulatory organization rules, and the position can be modified or revoked. Neither firm has given a launch date, and both will keep offering traditional accounts alongside the new structure.
Both brokers are expanding in the US regardless. eToro agreed in August to buy TradeZero for up to $231 million in cash, a deal expected to close in the first half of 2027, while Alpaca raised $435 million in July, including debt from Kraken parent Payward and BMO.
Source: SEC
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