Why is my account classified as a Pattern Day Trader account, and what can I do about it?

Overview:

A day trade is defined as a purchase and sale of a security (US and Non-US) within the same trading day. The FINRA regulations intended to limit the amount of trading that can be done in accounts with small amounts of capital, specifically accounts with less than 25,000 USD Net Liquidation Value. A Pattern Day Trader is someone who effects 4 or more day trades within a 5 business day period. You have violated these rules and are therefore subject to PDT restrictions.

Background:

How to see if an account is restricted?

In the Account Window, the third section titled Available for Trading displays a line titled Day Trades Left (T...,T+4).

In the example above, we will assume that today is Monday. The account will have 0 day trades available Monday and Tuesday. On Wednesday and Thursday, 2 day trades will be available. If those two trades are not used, the account will have all 3 day trades available on Friday.

What options are available if the account is restricted?

The customer has the following options:

  1. Deposit funds to bring the account's equity up to the SEC required minimum of USD $25,000.

  2. Request a PDT account reset (if available).

If an account is flagged as a Pattern Day Trader intraday, the customer will immediately be prohibited from initiating any new positions. Customers should be able to close any existing positions in his account, but will not be allowed to initiate any new positions.

The customer will have the same options listed above, however, if at any time the Net Liquidation Value figure goes back above the threshold amount ($25,000), then the account will once again have day trades available.

FINRA regulations state that if an account with less than USD 25,000 is flagged as a day trading account, the account must be frozen to prevent additional trades If you choose to perform a PDT Reset, you will be able to trade again 5 business days from the date of the last day trade. If you choose to deposit more funds into your account to bring your securities NLV above USD 25,000, you will be able to trade immediately.

If an account gets re-flagged as a PDT account at any time after a reset, the customer’s only option is to bring the account's equity up to the FINRA required minimum of $25,000.