News Release

NYSE and NASD Propose Higher Level of Margin Requirements for Day Trading

New York, Dec. 10—The National Association of Securities Dealers, Inc. Board of Governors and the New York Stock Exchange Board of Directors have approved proposals to establish special margin requirements for customers who day trade in an effort to address the risks associated with the practice.

The proposals, to be submitted to the Securities and Exchange Commission for approval, would amend NYSE Rule 431 and NASD Rule 2520, which govern margin requirements.

Under the proposed rules, customers who engage in a pattern of day trading would be subject to minimum equity requirements. The amendments would also limit a day trader’s buying power to an amount based on funds that must be in the account prior to any day trading activities.

The proposals would also:

  • Provide that a pattern day trader’s account must maintain a minimum equity of $25,000, at all times, as compared with a $2,000 requirement for other margin accounts. If the account of a pattern day trader falls below the required minimum equity, no further day trades will be permitted until the requirement is maintained.
  • Restrict pattern day traders from trading in excess of their day-trading buying power. If the day-trading buying power is exceeded, the account will be margined based on the total cost of all day-trade purchases for that day, and the customer’s day-trading buying power will be reduced until the necessary margin is deposited.
  • Restrict pattern day traders to day trading on a cash-available basis only, if the special margin call is not met within five business days.
  • Prohibit pattern day traders from utilizing account guarantees otherwise permitted in margin accounts.
  • Restrict withdrawal of money deposited to meet minimum equity and maintenance margin requirements for two business days in order to provide greater financial stability to such accounts.