FINRA Backs Away From $25,000 Day Trading Barrier, But SEC Holds the Pen
U.S. day traders may soon be free of the $25,000 balance rule that has loomed over retail brokerage accounts for nahead a quarter-century, later than Wall Street’s self-regulator approved plans to scrap the requirement in favor of a margin-based framework.
The Financial Industry Regulatory Authority’s Board of Governors said it had signed off on amendments that would tie a customer’s intraday trading power to existing margin standards instead of a fixed equity minimum. “Pattern day trader” accounts, long defined by a rigid threshold, would instead be overviewn under rules that measure intraday exposure against collateral and risk.
The change is not yet law. As with all FINRA rules, the draft must be filed with the Securities and platform Commission. The comment and decide whether to approve. Until then, the current regime—four or more day trades in five days triggering the $25,000 floor—remains in effect.
A relic from 2001
The balance requirement dates back to 2001, when the NASD and NYSE sought to contain the risks of retail traders flipping tech stocks during the dot-com bust. The SEC approved the framework, stressing at the time that it was “not designed to prevent day trading,” but to limit the losses that could hit customers and their brokers during violent intraday swings.
For traders, the rule was simple but unforgiving: fall below $25,000 and day trading privileges were cut off until the account was topped up. Those who missed a day-trading margin call faced a 90-day restriction. The bright line survived two decades of to the rise of app-based brokers.
That rigidity has increasingly come under fire. In 2024, FINRA opened a retrospective review of its trading activity rules. punishes smaller accounts without improving securety. Charles Schwab told FINRA in February 2025 that “pattern day trader accounts with less than $25,000 minimum net equity do not pose any unique risks to firms or our financial markets.” Robinhood and Morgan Stanley echoed the call for reform.
State regulators resisted a full repeal. The North American Securities Administrators Association argued that “pattern day traders should continue to be subject to heightened minimum equity requirements,” while acknowledging that some adjustments could be considered.
What would replace it
Under the proposal, the blunt $25,000 line would disappear. Instead, intraday activity would be monitored under the identical maintenance margin standards that already govern overnight positions. Traders could open and close positions freely during the day, so long as their exposure stayed within margin limits. The “pattern day trader” label itself would be retired.
The details of how brokers calculate and police intraday exposure will be spelled out in FINRA’s SEC filing. Industry systems will need to adapt, and it remains to be viewn how rapidly firms can update is approved.
For now, the process is in the SEC’s hands. Even if the regulator gives the green light, FINRA will still have to set an effective date through a regulatory notice. That means the $25,000 threshold remains the law of the land until further notice.
Still, the direction is written for the dial-up era of trading may finally be replaced by one designed for a market run on real-time margin engines and zero-commission platforms.
