Day Trading Margin Rules

The New York Stock Exchange (NYSE) and the Financial Industry Regulatory Authority, Inc. (FINRA) have filed amendments to NYSE Rule 431 and NASD Rule 2520 with the Securities and Exchange Commission (SEC) which increase margin requirements for active security traders. As a result, effective August 27, 2001, all accounts identified as pattern day traders will be required to maintain a minimum of $25,000.00 in equity at all times. Pattern day traders whose equity falls below the $25,000.00 requirement must deposit the funds necessary to meet the equity minimum before normal trading can resume.

Pattern Day Traders
Under the amendments, "pattern day traders" are defined as those customers who day trade (buy and sell the same position within the same trading day) four or more times in five business days. In addition, if Investrade knows or has a reasonable basis to believe that a client is a pattern day trader, the customer must be designated as a pattern day trader immediately, instead of delaying such determination for five business days.

Summary of Rule 431: