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Law Educator, Esq.
Law Educator, Esq., Attorney
Category: Legal
Satisfied Customers: 111537
Experience:  JA Mentor -Attorney Labor/employment, corporate, sports law, admiralty/maritime and civil rights law
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I would like to check into the possibility of bringing about

Customer Question

I would like to check into the possibility of bringing about a rule change that has personally cost me very large amounts of money over the last 15 years and that is enforced by the SEC. A class action or whatever means necessary is what I seek. The rule is if you trade with less than $25000.00 in your trading account you are limited to 3 day trades per week, or basically 5 business days that the market is open. If you exceed this, which I have, you are labeled a pattern day trader and your account will be restricted from use for 90 days. I have watched money go down the drain because I cannot exceed this limit, it makes no sense to regulate a small retail investor to disadvantage them because they don't have larger amounts of money in their account. Why should I have to lose money, I can least afford it, high frequency traders make millions of trades every day and so does banks and hedge funds, everyone except the poor person trying to make a little extra money trading actively in the market.
Submitted: 11 months ago.
Category: Legal
Expert:  Law Educator, Esq. replied 11 months ago.
Thank you for your question. I look forward to working with you to provide you the information you are seeking for educational purposes only.
I am afraid that the problem you face are these are rules that were made by the NASD and approved by them and the SEC. These rules were approved by the NASD Regulation Board of Directors and then filed with the Securities and Exchange Commission (SEC) and were published on February 18, 2000 by the SEC in the Federal Register. The SEC also published for comment substantially similar rule changes that were proposed by the New York Stock Exchange (NYSE). The SEC received over 250 comment letters in response to the publication of these rule changes. Both the NASD and NYSE filed with the SEC written responses to these comment letters. On February 27, 2001, the SEC approved both the NASD and NYSE day-trading margin rules.
So now, to change the rules, you would need to go through the NASD and NYSE to get their board to consider a rule change with your arguments as to how the $25,000 minimum is hurting the small investor seeking to engage in pattern day trading. The NASD found that by not having this imposed minimum, the prior regulations did not support adequately address the risks inherent in certain patterns of day trading and had encouraged practices, such as the use of cross-guarantees, that did not require customers to demonstrate actual financial ability to engage in day trading.
So you would have to work at trying to convince them that these risks would be adequately covered to get them to change their rules.
Customer: replied 11 months ago.
I knew it was futile but I feel it is a rule that hurts the small investor, thank you for your response in a timely manner.
Expert:  Law Educator, Esq. replied 11 months ago.
Thank you for your reply.
The only thing you can do to try to change the rule though is just try to pursue it through the NASD and NYSE, that is how rules change, someone starts by making a case for why the change is necessary. If you do not try, you never know.
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