What occurs when a customer opens and closes the same stock position without full payment in a cash account within 90 days?

When a customer opens and closes the same stock position without full payment in a cash account within 90 days, this scenario constitutes a violation of trading rules. In a cash account, securities must be paid for in full by the settlement date. If a customer sells a security and uses the proceeds to purchase a different security without having initially paid for the first security, it can lead to a situation known as "free-riding." Free-riding is prohibited because it allows customers to benefit from leverage without actually investing the full cash required.

The violation of trading rules can lead to various consequences including requiring customers to move to a margin account, which has different requirements regarding payment and trading. Understanding this concept is crucial for adhering to the regulatory framework set forth by organizations like FINRA, which oversees trading activities to promote fair and orderly markets.

Other choices pertain to different regulations or issues that do not specifically address the situation described in the question. Statutory disqualification relates to individuals being banned from associating with a broker-dealer due to legal issues, margin requirement breaches involve not meeting the conditions for borrowing funds, and refusal to settle refers to an unwillingness to fulfill obligations that result from trading activities. However, in the specific context of opening and closing positions