Stock-market trading platform Robinhood Markets, Inc. saw its share price come back sharply, recovering from steeper losses as trading moved into the afternoon on Wednesday. Robinhood shares surged 1% on news that industry regulator Financial Industry Regulatory Authority (FINRA) might make changes to restrictions on rules surrounding day trading. Unsurprisingly, investors welcomed the news with open arms. This new operation model has brought intense enthusiasm from the retail trader community that is still working their way through high barriers to trade.
Right now, the $25,000 minimum equity rule is the only thing that controls day trading. Traders are required to maintain an account balance of at least $25,000 in their margin account. This rule kicks in if they go out and execute four or more day trades over a five-business-day stretch. This regulation appeared in 2001 with the dot-com bubble and subsequent bust. It was supposed to stop small traders from tilting at windmills with a bunch of bad, risky internet stocks.
FINRA’s recent announcement could be the first step toward eliminating this antiquated rule once and for all. The regulatory body noted that advancements in technology and changes in market access have significantly transformed retail trading since the rule’s inception. This change could develop a healthier ecosystem for independent retail investors. They’ll have greater incentive and opportunity to seek out and day trade more actively.
If implemented, the rule amendments would better synchronize Robinhood’s intraday buying power with existing margin requirements. This change only affects trades entered during the trading day. This implementation change would level the playing field, creating opportunities for small, individual investors to earn fair, healthy returns. It gives them much more flesh and bone flexibility and access to day trading without the arbitrary $25,000 minimum equity requirement.
Market analysts see this new tech as an important way to help democratize trading access for more modest investors. FINRA appreciates the need to make changes to meet the demands of an evolving market landscape. The proposed changes have the potential to foster a more equitable environment for retail traders who have long felt hampered by existing regulations.
Robinhood is a savvy operator flourishing in one of the most competitive financial landscapes ever seen. The firm is constantly engaged on providing its users with the best trading features. All of FINRA’s proposed rule changes would make Robinhood even more appealing to retail investors. Which dovetails nicely with Robinhood’s overall mission of democratizing financial markets for everyone.