Day Trading Requirements

May 14, 2020

The rules adopt the term “pattern day trader,” which includes any margin customer that day trades (buys then sells or sells short then buys the same security on the same day) four or more times in five business days. Under the rules, a pattern day trader must maintain an equity balance above $25,000 on any day that the customer day trades. The required minimum equity balance must be in the account prior to any day-trading activities. If the account falls below the $25,000.01 requirement, the pattern day trader will not be permitted to place opening orders until the account is restored to the $25,000.01 minimum equity balance level. Liquidating orders are still permitted.

The rules permit a margin trader to trade up to four times the maintenance margin excess in the account as of the close of business of the previous day. If a margin trader exceeds the day-trading buying power limitation, the firm will issue a day-trading margin call to the margin trader. The margin trader will then have, at most, five business days to deposit funds to meet this day-trading margin call. Until the margin call is met, the day-trading account will berestricted to liquidating transactions only. If the day-trading margin call is not met by the fifth business day, the account will be further restricted to trading only on a cash available basis for 90 days or until the call is met

In addition, the rules require that any funds used to meet the day-trading minimum equity requirement or to meet any day-trading margin calls remain in the margin trader’s account for two business days (not including the day of deposit and the day of withdrawal, or a total of four business days) following the close of business on any day when the deposit is required. The rules also prohibit the use of cross-guarantees to meet any of the day-trading margin requirements.

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