Leland,
Regarding, As far as requiring an individual to have 25K to daytrade I think they are just trying to protect themselves from lawsuits, etc. These regulators don't want Joe Blow daytrading with his $5,000 life savings....
The driving force behind this is the NYSE and NASD, NOT the regulators. Further, NYSE and NASD don't particularly care about Joe Blow or any other investor/trader. They are quite happy if Joe Blow takes his life savings, follows a brokers recommendation and buys the stock from the broker, and then loses his money when the company goes broke. AS LONG AS THEY BUY THE STOCK FROM A BROKER. That's just "investment risk".
No, the NYSE and NASD are concerned about daytraders because they are competition! Daytraders buy and sell in the same way as the big boys. The NYSE and NASD aren't concerned about the daytraders losing; they are concerned when them winning!
Regarding the $25,000 amount... What is magical about $25,000? Why choose that figure? Does having more money to trade mean that they won't blow it? Why not increase the daytrader margin account size minimum to $100,000? That should get rid of more "Joe Blows". Ok, raise it to $500,000. Does that hit your account? Ok, raise the minimum to $5,000,000. What's to keep the NYSE and NASD from raising the daytrading account minimum until ALL daytraders are eliminated???
I personally believe that a major underlying goal is to legally define a category of traders as, "pattern day traders". Then, once the category is established and labeled as "bad", it becomes much easier to implement additional rules for this category.
Keep in mind that without a margin account, you can't short. We are probably heading into a down market for a while. Without margin, traders with accounts less than $25,000 won't be able to short when they should be shorting. Being forced to trade long only, they will tend to look for long opportunities where none exist. Trading against the trend is one of the surest ways to lose your money.
Regarding suitability, why don't we have suitability rules for people who gamble away their life savings? How about for people who drink? In the last five years, I would bet that the amount of money lost by "Joe Blow" on drinking and gambling is 1,000 times bigger than all of the money lost on day trading.
Fortunately, my account is larger than the proposed minimum, so I don't have to worry about this. I believe that you should have at least $20,000 or so to daytrade even part time. But I don't think that this should be mandated. And , I am concerned about future legislation and rules that are based on this rule.
Regards,
Dan. |
