Upcoming pattern day trading rule changes: What FINRA’s proposal could mean for margin accounts
E*TRADE from Morgan Stanley
Summary: A pending FINRA proposal would remove PDT status from margin rules, eliminate the $25,000 PDT equity minimum, and shift day-trading buying power to an intraday, margin-excess-based calculation. Implementation would follow SEC approval, and the firm will provide additional details and timing as the effective date approaches.
The Financial Industry Regulatory Authority (FINRA) has submitted a proposal to eliminate the current pattern day trading rules, which is pending approval by the Securities and Exchange Commission (SEC). Specifically, FINRA proposes removing the designation of a pattern day trader (PDT) from its margin requirements under FINRA Rule 4210, replacing it with a real-time, risk-based approach to margin. If approved by the SEC, as many industry observers expect, the proposal would result in several changes for clients using margin.
Under the current rule:
- A client who executes at least four day trades (i.e., opening and subsequently closing a security on the same trading day) within five consecutive trading days is designated a PDT;
- Once a client is designated as a PDT, there is a requirement to maintain a minimum of $25,000 of equity in the designated account; and
- The day-trade buying power for PDTs is calculated based on an account’s previous close-of-day FINRA excess.
Under the new rule proposal, which is expected to be approved, the following would apply:
- The PDT designation would be removed from FINRA Rule 4210;
- The $25,000 minimum equity requirement for PDTs would be eliminated;
- The margin buying power for all margin accounts would be calculated based on the account’s margin excess at the time of the opening transaction (referred to as “intra-day margin level”);
- Current PDT accounts that have less than $25,000 in equity and are restricted to “liquidating transactions only” would no longer be restricted (although the $2,000 minimum equity requirement for margin accounts would still apply); and
- Cash swept to a bank sweep product or money-market mutual fund could now be included in buying power calculations.
It is highly anticipated that the SEC will approve FINRA’s proposed amendments, with implementation to follow shortly thereafter. The Firm will provide additional communications to impacted clients once the new rules are approved and the implementation date approaches.
CRC# 5365980 04/2026