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ARTICLE · 29 MARCH 2021

FINRA Updates Day Trading Guidance

Hogan Lovells Cadwalader
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FINRA clarified its interpretations for margin rules on counting day trades and pattern day trading.

United StatesFinance and Banking
Hogan Lovells Cadwalader
Hogan Lovells Cadwalader
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FINRA clarified its interpretations for margin rules on counting day trades and pattern day trading (FINRA Rule 4210(f)(8)(B)(ii)).

New Interpretation /02 provides an alternative method for counting day trades when the same security is purchased and sold multiple times on a single day. Under the new interpretation, firms may count the number of times a customer changes its trading direction, from buying to selling or from selling to buying. That is, a customer may execute any number of purchases (sales) in a row in one security, and those are effectively treated as one transaction. Then, if the customer executes any number of sales (purchases) in a row, they will be treated as one day-trade.

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