SEC Staff Clears Path for Brokerage Model That Keeps Customer Cash Off-Platform

SEC staff said it would not recommend enforcement action against two broker-dealers using a "zero cash balance" structure, in which customer cash is held in an External Cash Account at a bank or a state-licensed, FinCEN-registered money services business and moves into the brokerage account only to fund purchases, per two letters dated September 17, 2026.

In a letter to Alpaca Securities LLC, a carrying and clearing broker-dealer, staff addressed the Customer Protection Rule, Rule 15c3-3. Staff said it would not recommend enforcement action under Exchange Act Section 15(c)(3) and Rule 15c3-3(j)(2) if Alpaca, acting on a customer's standing authorization and an instruction with each sale order, remits free credit balances from securities sales to the customer's External Cash Account promptly, and no later than the close of business on the following business day. Alpaca must also treat any free credit balance still held when it performs its reserve computation as a credit item, and exchange daily reconciliation reports with the money services business.

In a separate letter to eToro USA Securities Inc., an introducing broker that clears on a fully disclosed basis, staff addressed the Net Capital Rule, Rule 15c3-1. Staff said it would not recommend enforcement action if eToro maintains net capital of at least the greater of $5,000 under Rule 15c3-1(a)(2)(vi) or the amount required under Rule 15c3-1(a)(1), based on eToro's representation that it does not receive or hold customer funds or securities.

Both letters are conditioned on: (i) disclosure to customers that funds moved to the External Cash Account are not protected under SIPA; (ii) the money services business is not commingling those funds with its own proprietary funds; and (iii) the broker-dealer periodically checking the money services business's licensing.