Like you said he can still trade on margin with cash a/c.
Now IB being in India knows very well Indians cannot trade on margin and yet they allow it.
How is this legal?
Indian brokers also allow you to invest in US stocks but they make it very clear that you cannot trade on margin and they don't give you margin. But IB does not make it clear and they are putting customers are risk. If you ask IB regarding this , they say it is up to you to take the risk. They just want their brokerage.
Now IB being in India knows very well Indians cannot trade on margin and yet they allow it.
How is this legal?
Indian brokers also allow you to invest in US stocks but they make it very clear that you cannot trade on margin and they don't give you margin. But IB does not make it clear and they are putting customers are risk. If you ask IB regarding this , they say it is up to you to take the risk. They just want their brokerage.
Just because they classify it as a "cash account" and are covering themselves by saying its meant for resident Indians to invest in equity but nature of their account structure is that derivative facility is also combined and its up to the customer not to break any laws is totally unjustified.
They have some how manged to get away with this.
Now ....coming to Donish ... as I said nothing illegal in what he is doing by opening an IB account to invest in NYSE as a resident India, in fact its a smart move as he will probably save on costs.