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Regulators are trying to dismantle one of the most controversial barriers for active retailers. This is the minimum stock rule of $25,000 for pattern day trading.
Financial industry regulators on Tuesday approved an amendment that replaces long-standing thresholds, making active day trading more accessible to smaller accounts. This change is pending approval by the Securities and Exchange Commission.
The $25,000 minimum stock rule requires traders to maintain a minimum account balance of $25,000 in their margin accounts in order to run more than four days of trading within a five-year period. It was introduced in 2001 amid the dot-com bubble and crash as regulators grew, worrying that small traders were taking excessive risks in volatile internet stocks.
FINRA has replaced this mission with an intraday margin rule that applies existing maintenance margin rules to intraday exposure. In other words, intraday purchasing power is based on margin requirements for positions undertaken during the day rather than the minimum for fixed stocks.
Regulators said the overhaul reflects how technology and market access has changed retail transactions since the rules were first adopted.
Changes to the rules could lead to increased trading and activity for brokers like Robinhood.
Robinhood shares were rebounded from previous losses, up 1% in Wednesday’s trading, following FINRA News.
