Day-Trading Rules

Day trading sits at the intersection of high-risk strategy approval (suitability/Reg BI) and high-leverage margin rules. The three rules together govern the disclosures, the account approval, and the margin maintenance that apply to any retail day-trading account. The exam tests them as a sequence: disclose, approve, monitor.

Day-Trading Risk Disclosure Statement

A member that promotes a day-trading strategy must furnish a risk disclosure statement before opening a non-institutional account. The disclosure must be:

• Individually delivered to the customer
• Posted on the firm's website if applicable

A firm "promotes" day trading when its public communications, recruitment materials, or sales conversations encourage the strategy. A firm that simply executes day trades for customers who choose the strategy on their own does not necessarily "promote" it. The exam tests the trigger as a fact-pattern question.

Required Disclosure Content

The risk disclosure statement must include:

• Day trading is generally not appropriate for someone of limited resources, limited investment experience, or low risk tolerance
• Customers should be prepared to lose all funds used for day trading
• Day trading should NOT be funded with retirement savings, student loans, second mortgages, emergency funds, or other essential-purpose funds
• Investment of less than $50,000 can significantly impair a day trader's ability to make a profit (per the disclosure language)

Think of it this way: The day-trading risk disclosure is intentionally bleak. It is designed to give the customer a frank warning before they commit to a strategy that historically has poor outcomes. The firm must put this in front of the customer; it cannot bury it in an account agreement.

Exam Tip: Gotchas

• The disclosure rule applies to firms that PROMOTE day trading, not to all firms with day-trading customers. A firm that markets itself as a day-trading platform must deliver the disclosure; a firm that incidentally has day-trading customers may not.
• The disclosure must be individually delivered before account opening, not at the time of the first day trade. A customer who opens an account at a day-trading firm gets the disclosure upfront, before any orders are accepted.

Approval Procedures for Day-Trading Accounts

Before opening an account for a non-institutional customer at a firm that promotes day trading, the firm must either:

• Make a good-faith determination that day trading is appropriate for the customer (using essential information and the customer's profile), OR
• Obtain the customer's written agreement that the customer does not intend to use the account for day trading

The firm must keep records of approval determinations or written agreements.

How the Determination Is Made

A good-faith determination requires the firm to consider:

• The customer's financial situation (income, net worth)
• The customer's investment experience (especially with high-frequency trading)
• The customer's risk tolerance
• The customer's investment objectives (speculation, growth, income)
• Any other essential information indicating whether day trading is appropriate

This is parallel to customer-specific suitability, applied to the strategy rather than to a specific recommendation. A firm that approves day trading for a retiree with limited assets and no trading experience violates the day-trading approval rule regardless of whether any particular trade is later unsuitable.

Think of it this way: The approval rule forces the firm to make a binary choice at account opening: either certify in writing that the customer is suitable for day trading, or get the customer's written commitment not to day trade. There is no middle path. If the customer later does day-trade in violation of the no-day-trading agreement, the firm has the documented written agreement as a defense.

Exam Tip: Gotchas

• The approval rule gives the firm a binary choice at account opening. Either approve the customer for day trading (with documentation) or get the customer's written agreement not to day trade. There is no "we'll see what happens" option.
• Records of the approval determination or written agreement must be retained. A firm that approves day trading and then cannot produce the underlying documentation has violated the day-trading approval rule even if the determination would have been correct.

Intraday Margin (the PDT regime was repealed)

The pattern day trader (PDT) margin rule was repealed effective June 4, 2026. The PDT designation, the 4-day-trades-in-5-business-days test, the $25,000 minimum equity, and 4:1 day-trading buying power no longer exist. Margin on an active day-trading account now runs on an intraday margin deficit.

How the Intraday Margin Deficit Works

For each margin account (other than a good-faith or portfolio-margin account), on any day a transaction reduces the account's intraday margin, the firm determines the account's intraday margin deficit.

• Every deficit must be satisfied as promptly as possible. For the rule's tracking provisions, it stays outstanding until satisfied or the close of the 15th business day. This is not permission to delay payment for 15 days.
• Practice-test exclusion: a deficit at or below the lesser of 5% of account equity or $1,000 is excluded when determining a practice of failing to satisfy deficits promptly. It still must be satisfied promptly.

The 90-Day Restriction

A customer who makes a practice of not satisfying intraday margin deficits promptly, and fails to satisfy one by the close of the 5th business day after it occurs, is restricted from creating or increasing a short position or debit balance.

The restriction lasts 90 calendar days after that fifth business day or until the triggering deficit is satisfied. Its tracking-period expiration does not count as satisfaction. A debit balance may increase to close a short position.

Exam Tip: Gotchas

• The former PDT tests have been replaced by intraday margin requirements. Small deficits remain payable even when excluded from the practice test.
• Prompt payment, the restriction trigger, and the tracking limit serve different purposes. The fifth business day concerns the restriction trigger; the fifteenth limits outstanding-deficit tracking. Satisfaction of the triggering deficit can end the restriction early; expiration of the tracking period cannot.

How the Three Rules Stack on a Day-Trading Account

A retail customer wants to day-trade at a firm that promotes day trading. Three rules apply:

• Risk disclosure: the firm must deliver the risk disclosure statement before opening the account
• Approval procedure: the firm must either make a good-faith determination of appropriateness or obtain the customer's written agreement not to day-trade
• Intraday margin: the firm must monitor the account's intraday margin deficit and require it to be cured promptly (the old PDT $25,000 minimum no longer applies)

Exam Tip: Gotchas

• Risk disclosure and approval apply at account opening; the intraday-margin rules apply to the account's day-to-day trading. The disclosure and approval procedures are upfront; the intraday margin deficit is monitored as the customer trades.

What Should You Check on Exam Day?

• Can you state the two account-approval options for a firm promoting day trading: a good-faith appropriateness determination or a written no-day-trading agreement?
• Can you calculate the practice-test exclusion and explain why an excluded deficit still requires prompt payment?
• Can you state when a 90-day restriction on new short positions or debit balances applies: after a practice of missing the 5th-business-day deadline?
• Do you know why the day-trading risk disclosure applies only to firms that promote day trading, not to every firm with day-trading customers?