FINRA Announces Updates to the Interpretations of FINRA’s Margin Rule for Day Trading

March 24, 2021

Background
FINRA Rule 4210 specifies margin requirements for securities held in margin accounts, including both strategy-based margin accounts and portfolio margin accounts. Interpretations on Rule 4210, available on the Interpretations of Margin Rule webpage.

Day Trading
FINRA Rule 4210(f)(8)(B)(i) defines day trading to mean purchasing/selling or selling/ purchase same security on the same day in margin account except position held overnight. Defines pattern day trader as a customer that executes four (4) or more day trades within 5 days. Firms have raised questions about the determination of when multiple purchases and sales of the same security on the same day are considered a single-day trade.

New Interpretations
To provide additional flexibility and guidance, FINRA added a new Interpretation /02. Interpretation /02 provides an alternative method to calculate the number of day trades when there are multiple purchases and sales of the same security on the same day. In addition to numerical determinations of when customers classified as pattern day traders, Rule 4210(f)(8)(B)(ii) provides if the member knows, a reasonable basis to believe. That customer will engage in pattern day trading, then such requirements will apply. Investors and firms have raised questions about how to terminate a customer’s pattern day trader classification if the investor no longer wishes to engage in such trading. FINRA added a new Interpretation /03 regarding terminating pattern day trader status.

For more information, visit www.Finra.org.

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