In a busy day for the Securities and Exchange Commission (SEC), a significant change impacting smaller investors has been announced, thus driving shares of retail brokerage firms higher.
Under the new rule, which saw its comment period end in February, the old Pattern Day Trader (PDT) rule has been scrapped. Previously, there was a $25,000 minimum equity requirement under the rule. Last December, FINRA proposed the rule change to provide a “modern intraday margin standard.”
To quote the change:
“The proposed rule change would, among other things, eliminate provisions relating to “pattern day traders,” the computation and use of “day-trading buying power,” and the minimum equity requirement of $25,000 for pattern day traders, and would implement instead new intraday margin standards. Additionally, the proposed rule change would update certain provisions in Rule 4210 in light of the proposed change implementing intraday margin requirements and delete obsolete references.”
This change is being interpretad as beneficial for smaller, active traders which may increase activity on brokerages that cater to smaller investors.
Robinhood (NASDAQ:HOOD) is up currently up over 7% in early trading. Coinbase (NASDAQ:COIN) is slightly higher after a big rise in shares yesterday. Shares of Charles Schwab were only slightly higher.
Modern exchanges that combine crypto trading, traditional securities plus updated transacation and banking capabilities have appealed to a younger generation of investors who tend to hold smaller accounts. These “everything platforms” are poised to challenge more established broker-dealers over time.