SEC clears "zero cash balance" brokerage model in no-action letters to Alpaca Securities and eToro USA

The SEC's Division of Trading and Markets issued no-action letters on September 17 to Alpaca Securities LLC and eToro USA Securities Inc., providing a regulatory path for a "zero cash balance" brokerage model in which customer cash sits in an external bank or money-services business account rather than inside the brokerage account, with funds drawn over only as needed to settle a securities transaction.

The Alpaca letter addresses the Customer Protection Rule, Rule 15c3-3, which governs how broker-dealers must safeguard customer funds and securities; the relief covers the mechanics of transferring what would otherwise be a customer's free credit balance out to the external account. The eToro letter is narrower in scope, permitting an introducing broker operating under the model to maintain a $5,000 minimum net capital requirement rather than a higher figure.

The zero cash balance structure is central to the pitch made by fintech platforms that pair a brokerage account with a linked bank or e-money account — letting a customer's uninvested cash earn yield or sit in a more flexible account rather than as an idle brokerage balance, while still allowing near-instant draws for trading. Alpaca in particular provides the infrastructure other consumer-facing trading and investing apps build on top of, so relief granted to it can shape how its platform partners are able to structure their own cash-management features.

A no-action letter is not a formal rule change; it is the SEC staff stating it will not recommend enforcement action against the specific conduct described, based on the facts presented by the requesting firm. That means the relief is tied closely to the operational details each firm described in its request, and other firms seeking to rely on similar structures would need their own letter or a clear read that their setup matches what the SEC already reviewed.