Even with an account balance of more than USD$25K, FINRA’s rules limit pattern day traders to trade up to their day-trading buying power. If customers exceed this limit, a day trade call will be issued.
The day-trading buying power is equal to 4x the Exchange margin excess:
Exchange = Market value (stocks) x 25%
Exchange = Equity (stocks + cash) - Exchange requirement
Day-trading = 4 x Exchange margin excess
WHAT HAPPENS IF YOU EXCEED THIS LIMIT?
If this limit is exceeded, Stake will notify customers that they have up to five business days to deposit funds to meet the call. Until the call is met, the account will be restricted to a day-trading buying power of 2x the exchange margin excess. If the day trade call is not met by the deadline, the account will be further restricted to the exchange margin excess.
If customers have a call that was not met and receive a second day trade call, the account is restrained and they will not be allowed to place any further day trades for the following 90 days or until the calls are met.
This restriction only prevents customers from making day trades (you make a day trade when you buy and then sell the same stock/security on the same trading day). Apart from that, the account can be used normally.
SOME IMPORTANT POINTS:
Day trade calls and pattern day trade restrictions are different things, however, both are very important when day trading stocks/securities and are US regulatory (FINRA) rules, not Stake’s rules. Therefore, those marked as Pattern Day Traders could face further restrictions beyond the 90 days, day trade restriction, at the discretion of our US broker-dealer, DriveWealth.
Margin requirements are calculated based on the customer's securities positions at the end of the trading day. A customer who only day trades and does not have a security position at the end of the day has generated financial risk throughout the day nevertheless. So, these rules impose a margin requirement for day trading calculated based on the customer’s largest open position during the day.
Our broker partner DriveWealth is free to impose a higher equity requirement than the minimum specified in the rules. The rules also prohibit the use of cross-guarantees to meet any of the day-trading margin requirements.