Wall Street Scrapped a 25-Year-Old Rule. Does It Make Robinhood Stock a Buy Right Now?
Eliminating this rule could boost trading volumes at Robinhood.
Overview
For years, retail margin accounts with less than $25,000 in equity were limited to fewer than four day trades within any rolling five-business-day window. When customers exceeded this threshold, they were subject to a 90-day account freeze. Now, 25 years later, regulators have scrapped the pattern day trading rule.
Robinhood Markets' (NASDAQ: HOOD) trading platform has historically served users with significantly fewer assets than those of traditional brokers. Without these users hamstrung by old pattern-day-trading rules, is Robinhood stock a buy?
Details
The Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) overhauled Rule 4210, abolishing the pattern day trader (PDT) rule. Regulators eliminated the $25,000 equity and trade-counting requirements and replaced them with a $2,000 standard Regulation T minimum and risk-based intraday margin system. As a result, millions of smaller retail traders can day trade without restriction.
Source
Originally published at www.fool.com.