SEC Division of Trading and Markets no-action letter: Alpaca Securities LLC

DIVISION OP"
Tl"l:AOING ANO MA"K�T.,
UN !TED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON. D.C. 20549
September 17, 2026
Ethan L. Silver
Partner
Lowenstein Sandler LLP
1251 A venue of the Americas
New York, NY 10020
Re:
Dear Mr. Silver:
Treatment of Free Credit Balances Under Certain Zero Cash Balance Brokerage Offerings The Division of Trading and Markets ("Division") is in receipt of your Letter dated September 17, 2026 ("Letter"). 1 In summary, your Letter states that Alpaca Securities LLC (the "Firm"), a carrying and clearing broker-dealer that, in addition to its traditional brokerage account offering, seeks to support the operation of a "zero cash balance" brokerage account ("Brokerage Account") model. Your Letter further states that, under this model, the Finn's Brokerage Account customers ("Customers") (which may be introduced to the Firm by other introducing broker￾dealers) elect to (1) deposit and maintain funds in separate accounts maintained by a state￾licensed money services business that is registered with the Financial Crimes Enforcement Network (an "MSB'') or by a bank; (2) transfer funds from the Customer's account at the MSB or bank (each, an "External Cash Account") to the Firm to satisfy securities buy orders; and (3) transfer free credit balances arising from the proceeds from securities sales from the Firm to the customer's External Cash Account. You also represent that the Firm and the MSB will, on a daily basis, exchange reconciliation reports detailing the funds transferred into Brokerage Accounts from External Cash Accounts, as well as free credit balances transferred from Brokerage Accounts to External Cash Accounts. Under paragraph (j)(2) of Rule 15c3-3, a broker-dealer "must not convert, invest, or transfer to another account or institution, credit balances held in a customer's account except as provided in paragraphs (i)(2)(i) and (i)(2)(ii)" of Rule I 5c3-3. 2 You requested assurance that the staff of the Division will not recommend enforcement action to the U.S. Securities and Exchange Commission (the "Commission") under section l5(c)(3) of the U.S. Securities Exchange Act of 1934 (the "Exchange Act") and Rule I 5c3-3(i)(2) thereunder under the following circumstances:
A copy of the Letter is attached.
17 CFR 240. l 5c3-3U)(2). Paragraph U)(2)(i) of Rule l 5c3-3 permits a broker-dealer "to invest or transfer to another account or institution, free credit balances in a customer's account only upon a specific order, authorization, or draft from the customer, and only in the manner, and under the terms and conditions, specified in the order, authorization or draft." See 17 CFR 240. l 5c3- 3U)(2)(i).

September 17, 2026
Mr. Raymond Lombardo
Acting Associate Director
Division of Trading and Markets
U.S. Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Re: Request for No Action Letter – Zero Cash Balance Brokerage Offerings Dear Mr. Lombardo:
We are writing on behalf of Alpaca Securities LLC (the “Firm”) which is a carrying and clearing broker￾dealer that, in addition to its traditional brokerage account offering, seeks to support the operation of a “zero cash balance” brokerage account model, whereby its “zero cash balance” brokerage customers (“Customers”) (which may be introduced to the Firm by other introducing broker-dealers) elect to (1) deposit and maintain funds in separate accounts maintained by a state licensed money services business that is registered with the Financial Crimes Enforcement Network (an “MSB”) or by a bank, (2) transfer funds from the Customer’s account at the MSB or bank (each, an External Cash Account”) to the Firm to satisfy securities buy orders, and (3) transfer cash proceeds from securities sales from the Firm to the Customer’s External Cash Account. The Firm will continue to offer traditional brokerage accounts in addition to “zero cash balance” brokerage accounts. We respectfully request assurance that the staff of the Division of Trading and Markets (the “Staff”) will not recommend enforcement action to the U.S. Securities and Exchange Commission (the “Commission”) under section 15(c)(3) of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), as well as 15c3-3(j)(2) thereunder if, under the circumstances described herein, the Firm supports the operation of a “zero cash balance” brokerage account model in connection with its Customer accounts. Firm Business Model; Role of Introducing Firm, Carrying Firm, and MSB The Firm’s “zero cash balance” brokerage account model operates broadly as follows:

1. The Firm carries “zero cash balance” brokerage accounts (each, a “Brokerage Account”) for
   Customers who are required to open an External Cash Account as a condition to opening a Brokerage Account.
2. Customers do not directly fund or otherwise maintain funds within their Brokerage Accounts.
   Instead, Customers deposit and maintain funds within their External Cash Accounts. When Ethan L. Silver Partner 1251 Avenue of the Americas New York, New York 10020 T: (212) 419-5862 F: (973) 597-2400 E: esilver@lowenstein.com

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Customers place a securities buy order through their Brokerage Account, they provide a corresponding instruction to the MSB or bank, as applicable, to transfer necessary funds from their External Cash Account to their Brokerage Account. When Customers sell a securities position out of their Brokerage Account, they provide a corresponding instruction to the Firm to transfer the free credit balances arising from sales proceeds from the Firm to their External Cash Account.
3. The Firm and the MSB will, on a daily basis, exchange reconciliation reports detailing funds
transferred into Customer Brokerage Accounts from External Cash Accounts as well as free credit balances transferred from Customer Brokerage Accounts to External Cash Accounts. Example Securities Purchase Transaction Flow: Customer places a buy order with the Firm for 1 share of ABC stock (“ABC”) at a price of $100. In conjunction with the delivery of the buy order to the Firm, the Customer also delivers an instruction to the MSB or bank, as applicable, to transfer $100 from their External Cash Account to their Brokerage Account carried by the Firm. The MSB or bank, as applicable, transfers $100 to the Firm. Upon receipt, the Firm allocates the $100 to the Customer’s Brokerage Account. On T+1 the ABC buy order settles and 1 share of ABC is allocated to the Customer’s Brokerage Account. Example Securities Sale Transaction Flow: Customer holds 1 share of ABC in their Brokerage Account. Customer places a sell order with the Firm for 1 share of ABC. In conjunction with the delivery of the sell order to the Firm, the Customer also delivers an instruction to the Firm to transfer free credit balances arising from the sales proceeds to the Customer’s External Cash Account. On T+1 the sell order settles and $100 is credited to the Customer’s Brokerage Account. The Firm then promptly, but in any event prior to the close of business on the following business day, transfers the $100 to the Customer’s External Cash Account. Additional details regarding the operation of the Firm’s “zero cash balance” brokerage account model:

1. The Firm carries Brokerage Accounts, receives and holds customer funds and securities in
   connection with the Brokerage Accounts and maintains a minimum net capital of the greater of $250,000, or 2 percent of aggregate debit items computed in accordance with the Formula for Determination of Reserve Requirements for Brokers and Dealers (Exhibit A to Rule 15c3-3, § 240.15c3-3a) pursuant to Rule 15c3-1(a)(1)(ii);
2. The Firm operates pursuant to the full provisions of Rule 15c3-3, including Rule 15c3-3(j)(2)
   thereof,1 and makes and keeps current and preserves such books and records pertaining thereto pursuant to the requirements of Rules 17a-3 and 17a-4, as are customarily made and kept by a clearing broker or dealer;
3. Each Customer, under the terms of their brokerage account agreement with the Firm and/or the
   applicable introducing broker (the “Brokerage Customer Agreements”), designates an External Cash Account, to (a) serve as the funding source for any transfer of funds into the Customer’s Brokerage Account, and (b) serve as the designated destination account for any transfers of funds out of the Customer’s Brokerage Account;
4. Pursuant to Rule 15c3-3(j)(2)(i), the Brokerage Customer Agreements include a provision that
   pursuant to the Customer’s specific consent, instruction, and standing authorization, the Firm will promptly, but in any event prior to the close of business on the following business day, remit all 1 Rule 15c3-3 protects customer assets by specifying that a broker-dealer “must not convert, invest, or transfer to another account or institution, credit balances held in a customer's account except as provided in Rule 15c3-3(2)(i) and (ii)[.]” See 17 CFR 240.15c3-3(j)(2).

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free credit balances in the customer’s Brokerage Account to the Customer’s External Cash Account and to continue to make such transfers on an ongoing basis in the manner, and under the terms and conditions, specified in the Customer’s standing authorization, until further notice from the Customer (the “Standing Authorization”).2 In the event that any free credit balances have not been remitted as of the time that the Firm’s reserve bank account computation is required to be determined pursuant to Rule 15c3-3(e), the Firm will include such free credit balances as a credit item in the Formula for Determination of Reserve Requirements for Brokers and Dealers under Rule 15c3-3a.;
5. The terms of the Brokerage Customer Agreements clearly disclose that all funds transferred by the
Firm to the Customer’s External Cash Account are not held in the customer’s Brokerage Account and therefore not recognized as eligible claims of “customers” under the Securities Investor Protection Act of 1970 (“SIPA”), rendering such funds ineligible for protection under SIPA and the Securities Investor Protection Corporation;
6. Pursuant to Rule 15c3-3(j)(2)(i), free credit balances are transferred from the Customer’s Brokerage
Account to the customer’s External Cash Account only in the manner, and under the terms and conditions, specified in the Customer’s Standing Authorization; 3
7. Contemporaneous with the submission of an order to sell securities held at the Firm, the Customer
explicitly agrees, acknowledges, and instructs the Firm to transfer corresponding free credit balances arising from sales proceeds to the Customer’s External Cash Account upon settlement, consistent with the Customer’s Standing Authorization;
8. Funds held in any External Cash Account will not be commingled with proprietary funds of the
MSB or bank, as applicable, and the Firm will conduct periodic checks to ensure that the MSB or bank provider of External Cash Accounts maintains appropriate licensure and registration necessary to facilitate its activities described herein; and
9. Important details regarding the operation of the “zero cash balance” brokerage account model (e.g.,
relevant information consistent with the points identified in items 3, 5 and 7 immediately above) will be prominently disclosed to customers, including within Brokerage Customer Agreements and at pertinent points within the Firm’s and/or introducing broker’s brokerage platform. Conclusion Based upon the foregoing, we request assurance that the Staff would not recommend enforcement action to the Commission against the Firm for violating section 15(c)(3) of the Exchange Act, or Rule 15c3-3(j)(2) thereunder, if it operates in accordance with the description above. 2 Specifically, Rule 15c3-3(j)(2)(i) states that a broker-dealer “is permitted to invest or transfer to another account or institution, free credit balances in a customer's account only upon a specific order, authorization, or draft from the customer, and only in the manner, and under the terms and conditions, specified in the order, authorization, or draft.” See 17 CFR 240.15c3-3(j)(2)(i). 3 See “Treatment of Free Credit Balances Outside of a Sweep Program,” Amended Customer Protection Rule, at Part II.A.5.ii.a (“a customer may consent to ongoing routine transfers from the customer’s account outside of a sweep program without obtaining the customer’s specific consent for each individual transfer, provided the customer has consented to the ongoing transfers under paragraph (j)(2)(i) of Rule 15c3-3”); See also, Division of Trading and Markets Frequently Asked Questions Concerning the Amendments to Certain Broker-Dealer Financial Responsibility Rules (March 6, 2014) (updated July 1, 2020), at Question 9, which affirms Staff’s position that a customer can authorize transfers to be made to outside accounts on a continuing basis with a single instruction.

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We appreciate your attention to this request. Please do not hesitate to contact me if you have any questions or require further information. Sincerely, Ethan L. Silver