Overview

• FINRA’s board approved amendments Tuesday to overhaul pattern day trading rules as part of its FINRA Forward modernization effort after feedback from firms, industry groups, and investors.
• The proposal swaps the fixed $25,000 equity threshold for an intraday margin framework that bases buying power on maintenance margin requirements for positions opened during the day.
• Under current rules, a pattern day trader is one who executes four or more day trades within five business days if those trades exceed 6% of total trades in the margin account.
• Day trading must occur in a margin account and the rules apply to all securities, including options; cash accounts cannot be used for day trading.
• The 2001 rule was adopted during the dot-com era to limit risk for small traders, and coverage notes the change could boost retail and options activity, with Robinhood shares up about 1% on the news.