I can’t express how glad I am to know someone is still looking out for the small-account trader…
Many others have already stated the most obvious reasons to do away with the financial industry’s antiquated “[Fin.] Crow” laws, b/k/a “Pattern Day Trader (PDT) rules” – discriminatory pay-to-play minimums, forcing traders to take debilitating losses rather than be branded ‘PDT’/closing-orders-only, etc. On the other end of the spectrum, governing bodies push for even higher minimums, cheerleading their role as “gatekeepers” under the guise of concern for the [ignorant] retail trader on the opposite side of their trades. (Ironically, many of the arguments made against ‘retail’ are the very behaviors that have been, and continue to be, perpetrated by institutional customers (i.e. reddit-fueled, “robinhood retail traders” did not bankrupt over-leveraged hedge funds).) But an issue I believe is often overlooked is the lack of regulation for brokers who implement these rules & guidelines with carte blanche.
The most egregious offenses occur with the tools of the trade: software. Ignoring the fact that most brokerage platforms don’t operate as intended (an alarming amount of the time), there’s no standardization across the board to justify enforcement of a rule such as PDT. Investors/traders barely get any notice as-is that we’re even close to violating a day-trading rule until after it’s occurred.
Interactive Brokers: Their [TWS] PDT counter is only visible within a table, after a couple of menu clicks. Most traders are only made aware once they hit their 3rd day-trade, since IB will prevent them from opening another purchase – not even a fraction of a share on an unrelated security – until the PDT count drops to 2. (THE KICKER: If your margin account happens to be over $25K, their PDT counter will simply display “Unlimited”, with no further explanation or indication that your day trades are NOT in fact “unlimited”, as you can (and will) still be marked a PDT for the 4th day-trade within a 5-day period.) Once flagged, their software (and humans) may or may not correctly inform you of your reset options, since their interpretation of PDT reset rules haven’t aligned with FINRA’s for quite some time.
Fidelity: Any info/warnings related to trading violations (PDT, free rides, good faith, etc.) are nestled deep within their web platform far from any order ticket. As described by a Fidelity moderator on their subreddit: “Clients can monitor their day trade counter on Fidelity.com by visiting your “Balances” page and selecting “Restrictions” under “Trading Profile.” You’ll want to ensure you have the right account selected”, (https://www.reddit.com/r/fidelityinvestments/comments/15pehkp/comment/jvxa56o/). “Trading Profile” is at the BOTTOM of the Balances page, but once you click “Restrictions” the day trade info is provided in a popup window. So if you have enough room on your screen – or you’re handy with ALT+TAB – you can refresh that popup whenever you want an updated count. Whether you receive a warning prior to executing a violating trade, however, seems to depend on the fickle state of Fidelity’s software that day.
E-trade: The Power E-trade platform readily displays a day-trade count on the Account widget, as well as the Account tab. E-trade is also more consistent with their day-trade, good-faith warnings prior to executing a trade. (The latter is an utmost necessity since their Account widget doesn’t display “settled” buying power, but “available”. You have to visit the “Account” tab to see settled funds.)
Tastytrade: Another brokerage that gets it right. Tastytrade’s day-trade counter is in their header, ensuring that it remains in constant view no matter where you navigate within the trading tab. (‘Tasty’, that invaluable, PREMIUM resource run by market legends Tom Sosnoff and Tony Batista, takes great pride in the education, enrichment, protection and training of retail traders of all account sizes and stages. Their “Rising Stars” segments alone speak volumes against the purported narrative of the ‘sophomoric non-institutional trader’ that needs to be protected from themesleves.)
This variance of PDT implementations is currently learned through a school of hard knocks and is only the tip of the iceberg. Brokerage idiosyncrasies are seldom listed in any support documentation and most traders never discover we’ve violated one of their rules until it’s too late. Will opening and closing a long butterfly intraday count as 1 day-trade or 3? You never know. Higher mandatory minimums can’t fix that. More stringent, punitive laws against the meager investor won’t fix that. To quote Nino Brown: “This is bigger than [Retail Traders]! This is big business!”
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Great Resigner Comment On Regulatory Notice 24-13
I can’t express how glad I am to know someone is still looking out for the small-account trader…
Many others have already stated the most obvious reasons to do away with the financial industry’s antiquated “[Fin.] Crow” laws, b/k/a “Pattern Day Trader (PDT) rules” – discriminatory pay-to-play minimums, forcing traders to take debilitating losses rather than be branded ‘PDT’/closing-orders-only, etc. On the other end of the spectrum, governing bodies push for even higher minimums, cheerleading their role as “gatekeepers” under the guise of concern for the [ignorant] retail trader on the opposite side of their trades. (Ironically, many of the arguments made against ‘retail’ are the very behaviors that have been, and continue to be, perpetrated by institutional customers (i.e. reddit-fueled, “robinhood retail traders” did not bankrupt over-leveraged hedge funds).) But an issue I believe is often overlooked is the lack of regulation for brokers who implement these rules & guidelines with carte blanche.
The most egregious offenses occur with the tools of the trade: software. Ignoring the fact that most brokerage platforms don’t operate as intended (an alarming amount of the time), there’s no standardization across the board to justify enforcement of a rule such as PDT. Investors/traders barely get any notice as-is that we’re even close to violating a day-trading rule until after it’s occurred.
Interactive Brokers: Their [TWS] PDT counter is only visible within a table, after a couple of menu clicks. Most traders are only made aware once they hit their 3rd day-trade, since IB will prevent them from opening another purchase – not even a fraction of a share on an unrelated security – until the PDT count drops to 2. (THE KICKER: If your margin account happens to be over $25K, their PDT counter will simply display “Unlimited”, with no further explanation or indication that your day trades are NOT in fact “unlimited”, as you can (and will) still be marked a PDT for the 4th day-trade within a 5-day period.) Once flagged, their software (and humans) may or may not correctly inform you of your reset options, since their interpretation of PDT reset rules haven’t aligned with FINRA’s for quite some time.
Fidelity: Any info/warnings related to trading violations (PDT, free rides, good faith, etc.) are nestled deep within their web platform far from any order ticket. As described by a Fidelity moderator on their subreddit: “Clients can monitor their day trade counter on Fidelity.com by visiting your “Balances” page and selecting “Restrictions” under “Trading Profile.” You’ll want to ensure you have the right account selected”, (https://www.reddit.com/r/fidelityinvestments/comments/15pehkp/comment/jvxa56o/). “Trading Profile” is at the BOTTOM of the Balances page, but once you click “Restrictions” the day trade info is provided in a popup window. So if you have enough room on your screen – or you’re handy with ALT+TAB – you can refresh that popup whenever you want an updated count. Whether you receive a warning prior to executing a violating trade, however, seems to depend on the fickle state of Fidelity’s software that day.
E-trade: The Power E-trade platform readily displays a day-trade count on the Account widget, as well as the Account tab. E-trade is also more consistent with their day-trade, good-faith warnings prior to executing a trade. (The latter is an utmost necessity since their Account widget doesn’t display “settled” buying power, but “available”. You have to visit the “Account” tab to see settled funds.)
Tastytrade: Another brokerage that gets it right. Tastytrade’s day-trade counter is in their header, ensuring that it remains in constant view no matter where you navigate within the trading tab. (‘Tasty’, that invaluable, PREMIUM resource run by market legends Tom Sosnoff and Tony Batista, takes great pride in the education, enrichment, protection and training of retail traders of all account sizes and stages. Their “Rising Stars” segments alone speak volumes against the purported narrative of the ‘sophomoric non-institutional trader’ that needs to be protected from themesleves.)
This variance of PDT implementations is currently learned through a school of hard knocks and is only the tip of the iceberg. Brokerage idiosyncrasies are seldom listed in any support documentation and most traders never discover we’ve violated one of their rules until it’s too late. Will opening and closing a long butterfly intraday count as 1 day-trade or 3? You never know. Higher mandatory minimums can’t fix that. More stringent, punitive laws against the meager investor won’t fix that. To quote Nino Brown: “This is bigger than [Retail Traders]! This is big business!”