SEC Approves FINRA Rule Replacing Day Trading Margin with Intraday Standards

SEC approved FINRA rule amendments to replace existing day trading margin provisions with intraday margin standards.

According to the Notice and Order, the rule changes will eliminate the current day trading margin requirements—FINRA Rule 4210 ("Margin Requirements")—that apply to FINRA member firms and their customers, including the definitions of "day trading" and "pattern day trader" FINRA Rule 4210(b) and (f)(10). The SEC said the amendments also remove the computation and use of "day-trading buying power" and the $25,000 minimum equity requirement for pattern day traders.

The SEC said that firms are now required to determine the "intraday margin deficit" for each customer margin account on any day there is an "IML-reducing transaction." Firms have the flexibility to comply by either implementing real-time monitoring to block trades that create deficits or by computing each customer's intraday margin deficit at the end of the day. The SEC said this ensures customers maintain equity commensurate with their market exposure at any given point during the trading day.

Further, when an account incurs an intraday margin deficit, the SEC said the customer must satisfy it as promptly as possible through deposits or position liquidations. If a customer makes a practice of failing to satisfy these deficits promptly and fails to meet a deficit within five business days, the member firm must freeze the account. This 90-day freeze prevents the customer from creating or increasing a short position or debit balance until the deficit is satisfied.

The SEC revised the implementation timeline based on public comments to establish a 45-day effective date following the publication of a Regulatory Notice, while allowing firms that need more time an 18-month phase-in period.