On September 17, 2026, U.S. Securities and Exchange Commission (the “SEC” or the “Commission”) Division of Trading and Markets staff (the “Staff”), issued two complementary no-action letters addressing “zero cash balance” brokerage account structures (the “Zero Cash Balance Model”). One letter was issued to Alpaca Securities LLC (the “Alpaca Letter”) and the other to eToro USA Securities Inc. (the “eToro Letter,” and together with the Alpaca Letter, the “Letters”). The Letters provide a potentially important roadmap for broker-dealers and fintech platforms seeking to integrate securities brokerage accounts with separate accounts at banks or money services businesses while minimizing the amount of customer cash maintained at the broker-dealer.
The Alpaca Letter addresses the Customer Protection Rule, Rule 15c3-3 under the Securities Exchange Act of 1934 (the “Exchange Act”), and provides no-action relief for a carrying broker-dealer that transfers free credit balances generated by securities sales to a designated external cash account pursuant to a standing customer authorization and transaction-level instructions. The eToro Letter addresses the Net Capital Rule, Exchange Act Rule 15c3-1, and provides no-action relief permitting an introducing broker-dealer participating in the same type of structure to operate subject to the $5,000 minimum net capital requirement applicable to certain fully disclosed introducing brokers. Taken together, the Letters provide a framework in which securities are held at a carrying broker while customer cash resides at a bank or appropriately regulated money services business (“MSB”), except when required to facilitate a securities transaction.
Under the Zero Cash Balance Model, a customer maintains two linked accounts:
The External Cash Account serves as both the source of funds for securities purchases and the destination for proceeds from securities sales.
For a purchase, the customer submits a securities order and simultaneously directs the bank or MSB to transfer to the carrying broker the amount necessary to fund the transaction. For a sale, the resulting free credit balance is transferred from the Brokerage Account back to the customer’s designated External Cash Account. Under the Alpaca Letter, the transfer must occur promptly and, in all events, before the close of business on the business day following the creation of the free credit balance. The practical result is that customer cash generally does not remain idle at the broker-dealer.
This is materially different from a conventional brokerage arrangement, in which cash proceeds may remain as a free credit balance at the broker-dealer or be swept into another investment or deposit product.
Rule 15c3-3 generally restricts a broker-dealer from transferring a customer’s free credit balance to another account or institution unless the transfer is made pursuant to a specific customer order, authorization, or draft and in accordance with the rule’s terms.
Pursuant to the Alpaca Letter, the Staff will not recommend enforcement action under Exchange Act Section 15(c)(3) or Rule 15c3-3(j)(2) if Alpaca remits customer free credit balances to the customer’s designated External Cash Account in accordance with the described Zero Cash Balance Model.
Importantly, the structure relies on a standing customer authorization for ongoing transfers of free credit balances. Prior SEC guidance recognizes that a customer may authorize recurring transfers under Rule 15c3-3(j)(2)(i) without separately consenting to each transfer.[1] Under the facts presented by Alpaca, however, the customer also provides an instruction contemporaneously with each sell order directing the resulting proceeds to the designated External Cash Account.
The Staff’s position in the Alpaca Letter is expressly fact-specific and rests on a number of conditions and representations, including the following:
Alpaca remains a carrying and clearing broker-dealer subject to the full requirements of Rule 15c3-3 and maintains net capital of the greater of $250,000 or 2% of aggregate debit items under Rule 15c3-1(a)(1)(ii). The no-action position does not alter those obligations.
The eToro Letter addresses a different regulatory question: whether an introducing broker participating in the Zero Cash Balance Model can continue to qualify for net-capital treatment applicable to brokers that do not receive or hold customer funds or securities.
In the eToro Letter, the Staff states that it will not recommend enforcement action if eToro maintains net capital equal to the greater of $5,000 or the amount otherwise required under Rule 15c3-1(a)(1) while operating the Zero Cash Balance Model.
The Staff’s position rests on the separation between the introducing firm and the carrying broker. eToro represented that it:
Of note, although the customer experience may appear integrated, the introducing broker cannot directly or indirectly receive or hold customer funds or securities merely because transfers are coordinated through the platform.
The Letters illustrate a framework for separating cash custody from securities custody, including a role for appropriately regulated MSBs in an integrated brokerage model.
A fintech platform could, for example, design a customer experience in which:
The structure may also be relevant to other integrated financial-services platforms, although the Letters do not address digital assets or stablecoins.
The Letters should not be read as allowing firms simply to designate an account as “external” and thereby remove the associated funds from the broker-dealer financial-responsibility framework. The Staff’s positions depend on the actual operational separation of the accounts, contractual authorization, prompt movement of cash, reconciliation procedures, appropriate regulation of the external provider, and clear disclosures concerning the loss of SIPA protection.
Firms evaluating a similar model should focus early on the legal agreements and operational architecture. Particular attention should be given to:
The Letters provide meaningful regulatory support for a brokerage model in which customer cash generally resides outside the broker-dealer, at a bank or appropriately regulated MSB, except when necessary to settle securities transactions. For carrying brokers, the Alpaca Letter provides a path for systematically transferring free credit balances out of Brokerage Accounts consistent with the Staff’s no-action position under Rule 15c3-3(j)(2). For introducing brokers, the eToro Letter indicates that participation in such an arrangement does not necessarily require a higher net capital category if the introducing firm remains fully disclosed and does not receive or hold customer funds or securities.
The Staff’s positions are narrow and fact-specific. Both Letters emphasize that they are based strictly on the facts and representations presented, and the Staff expressly declined to address other federal, state, foreign, or SRO requirements. The positions also may be modified or revoked at any time. Firms considering a similar structure should therefore ensure that their actual fund flows, customer authorization mechanics, clearing arrangements, reserve treatment, external-provider safeguards, and disclosures align with the framework described in the Letters.
[1] See “Financial Responsibility Rules for Broker-Dealers,” Exchange Act Release No. 34-70072, 78 Fed. Reg. 51,824, 51,838 (Aug. 21, 2013) (explaining that a customer may consent to ongoing routine transfers outside a sweep program without separately consenting to each transfer, provided the customer has consented to the ongoing transfers under Rule 15c3-3(j)(2)(i)); SEC Div. of Trading & Mkts., “Frequently Asked Questions Concerning the Amendments to Certain Broker-Dealer Financial Responsibility Rules,” Question 9 (Mar. 6, 2014, updated July 1, 2020) (recognizing that an authorization may cover transfers made on a continuing basis).