Stock and crypto trading platform Robinhood Markets (NASDAQ: HOOD) is rolling out a big overhaul of its trading rules starting this Fourth of July.
On June 1, Robinhood announced changes in line with new Financial Industry Regulatory Authority (FINRA) rules that replace the long-standing Pattern Day Trading (PDT) regime
The changes are expected to give Robinhood’s margin account holders significantly more flexibility. What’s changing on June 4 PDT is a FINRA framework established in 2001 that flags traders executing four or more day trades within five business days in a margin account. Flagged accounts must maintain a $25,000 minimum equity balance, face 4x buying power limits, and risk 90-day cash-only restrictions if day trade calls go unmet.
Introduced after the dot-com bubble to protect retail traders from leveraged losses, PDT has been criticized for blocking smaller traders However, the Securities and Exchange Commission (SEC) and FINRA have now officially eliminated the framework and replaced it with a new Intraday Margin Standard. Brokerages are transitioning to these updated rules as of June 4 this year. Under the new framework, Robinhood will also eliminate day trade restrictions and day trade calls on margin accounts.