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May 19 2013

is the FINRA pattern day trader rule applicable to firms that are not FINRA members?

FAQ: is the FINRA pattern day trader rule applicable to firms that are not FINRA members?

i want to be able to day-trade freely with an account balance of less than $ 25K. can i do this through a brokerage that’s not a FINRA member firm? also, is the pattern day trader rule applicable to forex trading the same as it is to trading stocks and options?


goldsenze.com Answer:

Let’s see…the question is a little misleading since US based non-FINRA members cannot clear trades for you. There are reporting rules, anti-money laundering, Patriot’s Act, and more rules rules rules for FINRA members. If you wanted to trade equities with a balance of less than 25K, you’ll have to make less than 4 day trades in any 5 consecutive trading days. So if you do 3 round trips a day, it’s ok. Or 4 or more trades in one day but not for 5 consecutive days, it’s ok. Thus, if you ‘day-trade’ M-Th but take every Friday off, it is ok by FINRA rules.

The minimum to start trading FX is much lower. FX is also not governed by the FINRA SRO. You can make whatever trades you want as long as you maintain the minimum balance for the particular FX broker/clearing house of choice.

If for some reason you’re able to find a non-FINRA broker, please let me know (I don’t know of any but it’s possible that there are overseas sites that’ll side step US policy). If you do find one of these, just be careful. You may not be dealing with US business laws any more. Your account may not have the same protection as it would with a FINRA member. So you’ll have to weigh the pros and cons yourself.

GL. And don’t churn tickets!

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March 26 2013

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