SEC Staff Provides No-Action Relief for “Zero Cash Balance” Brokerage Models

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.

How the Zero Cash Balance Model Works

Under the Zero Cash Balance Model, a customer maintains two linked accounts:

1. a securities brokerage account maintained by a carrying broker-dealer (a “Brokerage Account”); and
2. a separate cash account maintained by a bank or a state-licensed, FinCEN-registered MSB (an “External Cash Account”).

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.

Alpaca Letter: Rule 15c3-3 Relief for the Carrying Broker

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.

Key Conditions and Representations

The Staff’s position in the Alpaca Letter is expressly fact-specific and rests on a number of conditions and representations, including the following:

• Designated external account. The customer must designate a bank or qualifying MSB account as both the funding source for brokerage purchases and the destination for outgoing cash.
• Customer authorization. The brokerage agreement must contain the customer’s specific consent, instruction, and standing authorization for the transfer of free credit balances to the External Cash Account.
• Prompt transfer. Free credit balances must be remitted promptly and, in all events, no later than the close of business on the following business day.
• Transaction-level instruction. In connection with each securities sale, the customer must expressly acknowledge and instruct the broker to transfer the resulting proceeds to the External Cash Account.
• Reserve treatment. Any free credit balance that remains at the broker when the Rule 15c3-3 reserve computation is performed must be included as a credit item in the reserve formula.
• SIPA disclosure. Customers must be clearly informed that cash transferred to the External Cash Account is no longer held in the Brokerage Account and therefore is not an eligible customer claim for purposes of SIPA/SIPC protection.
• No commingling at the external provider. Funds maintained in the External Cash Account may not be commingled with the proprietary funds of the MSB or bank.
• Provider diligence. The broker must conduct periodic checks regarding the licensing and registration of the MSB or bank providing the External Cash Accounts.
• Daily reconciliation. Alpaca and the MSB will exchange daily reconciliation reports covering transfers into and out of Brokerage Accounts.
• Prominent customer disclosures. Material features of the Zero Cash Balance Model must appear not merely in contractual documentation, but also at relevant points on the brokerage platform itself.

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.

eToro Letter: $5,000 Net Capital Treatment for the Introducing Broker

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:

• does not directly or indirectly receive or hold customer funds or securities;
• does not owe customer funds or securities;
• does not carry customer accounts;
• does not conduct the higher-capital activities identified in Rule 15c3-1(a)(2)(i)–(v);
• introduces customer accounts to the carrying broker on a fully disclosed basis; and
• leaves responsibility for carrying the securities accounts and maintaining the related clearing books and records with the carrying broker.

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.

Implications for Broker-Dealers and Fintech Platforms

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:

• cash remains principally within a banking, payments, or MSB environment;
• funds move into the brokerage environment only when needed to settle securities purchases;
• securities remain at a carrying broker;
• sale proceeds rapidly return to the External Cash Account; and
• an introducing broker may preserve the capital treatment available to a fully disclosed introducing firm, as long as the introducing broker does not directly or indirectly receive or hold customer funds or securities.

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.

Key Compliance Considerations

Firms evaluating a similar model should focus early on the legal agreements and operational architecture. Particular attention should be given to:

• Customer agreements. The standing transfer authorization should be sufficiently specific to satisfy Rule 15c3-3(j)(2)(i), and the External Cash Account should be expressly identified as both the funding and destination account.
• Order-flow design. The Alpaca Letter contemplates affirmative customer instructions associated with securities transactions, particularly an instruction accompanying a sell order to transfer resulting proceeds.
• SIPA messaging. Platforms should clearly distinguish between assets held by the broker-dealer and assets held by the external institution. The customer interface should not create the impression that externally held cash continues to receive SIPA protection. Firms should also consider whether recommendations concerning the structure implicate Regulation Best Interest and should clearly disclose whether the externally held funds are not eligible for SIPA/SIPC protection, FDIC insurance, or other protections.
• MSB and banking diligence. Firms relying on an MSB should establish procedures to confirm and periodically monitor the provider’s licensing and FinCEN registration, as well as the treatment and segregation of customer funds. Firms should also understand any FDIC insurance implications and be prepared to address customer questions about the protections available for funds held at the external provider.
• Books, records, and reconciliation. The structure requires the carrying broker to retain its ordinary broker-dealer books and records, which includes daily reconciliation between the broker and the external cash provider.
• Net capital boundaries. An introducing broker relying on the eToro Letter must remain non-custodial. Activities that cause it directly or indirectly to receive or hold customer funds or securities could materially alter the Rule 15c3-1 analysis and the firm’s ability to rely on the no action position articulated therein.

Looking Ahead

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).