SEC/FINRA to end $25K PDT rule

The Securities and Exchange Commission approved a rewrite of the day-trading margin rule on April 14, clearing the way to retire the $25,000 pattern day trader threshold. (sec.gov) The change amends Financial Industry Regulatory Authority Rule 4210, which governs margin requirements at broker-dealers. The order says the old provisions for “pattern day traders,” day-trading buying power, and related restrictions will be deleted and replaced with new intraday margin standards. (sec.gov) Under the old rule, a customer was labeled a pattern day trader after four or more day trades in five business days if those trades were more than 6 percent of total margin-account trades. Those customers had to keep at least $25,000 in equity in the account. (sec.gov) Day trading here means buying and selling the same security in a margin account on the same day, including options. Financial Industry Regulatory Authority says the rule applies to any security traded that way, and day trading in a cash account is not permitted. (finra.org) Financial Industry Regulatory Authority filed the overhaul on December 29, 2025, and the Securities and Exchange Commission published it for comment on January 14, 2026. The commission said it received more than 100 comment letters before approving the rule on April 14, 2026. (sec.gov; sec.gov) Financial Industry Regulatory Authority said the new framework is built around intraday margin, meaning firms would measure risk while trades are happening instead of relying on a fixed account label and the prior day’s closing equity. The regulator said the goal is to reduce intraday exposure more broadly while removing the $25,000 minimum equity requirement. (finra.org; sec.gov) The pattern day trader rule dates to 2001, when regulators tightened margin rules after the late-1990s day-trading boom. A Financial Industry Regulatory Authority notice from March 2001 said the amendments were approved on February 27, 2001 and took effect on September 28, 2001. (finra.org) The original logic was that end-of-day margin rules did not capture the risk a clearing firm faced during the trading session if a customer opened and closed positions before the close. The 2001 notice said firms were exposed during the day even when a trader finished flat, with no position left by the close. (finra.org) Financial Industry Regulatory Authority reopened the issue in Regulatory Notice 24-13 on October 29, 2024, asking whether its day-trading rules were still effective and efficient. That notice repeated that day trading can be risky, especially for customers with limited resources, limited experience, or low risk tolerance. (finra.org) Supporters of the rewrite argued that modern brokers can monitor positions and margin in real time. Charles Schwab said in a February 3, 2025 comment letter that firms now have the ability to calculate buying power in real time, and the Securities Industry and Financial Markets Association said real-time systems can block trades that would create margin deficits. (finra.org; sec.gov) Financial Industry Regulatory Authority told the commission that all but one commenter supported the proposal, and many retail investors called the $25,000 threshold arbitrary and unfair to smaller accounts. The regulator said commenters argued the old rule could keep traders from exiting losing positions for fear of triggering the designation. (finra.org) The rule is approved, but it is not immediate. The commission’s April 14 order notes that Financial Industry Regulatory Authority amended the filing on April 2 to change the implementation timing, so brokers now have a transition period before the old pattern day trader framework disappears. (sec.gov; sec.gov)