Seems to me that a margin investor represents a much higher risk to a brokerage than a pure daytrader
You'd think so, wouldn't you. Apparently, the statistics (however unscientifically gathered they're reputed to be, I believe they're mostly accurate - even if accidentally) as well as the percentage losses that many daytrading customers show - including the interim losses that even traders who eventually become successful show via the "learning curve" - are far greater than many retail, bona fide "investors" show.
And, far more importantly, losses in retail customer accounts occur at a slower rate, typically, than in daytrading accounts.
Go figure.
OK. If I were to speculate, I'd say that the goals of the rule are these: the 50 to 25% reduction recognizes that true daytraders add liquidity to the markets and are - or should - be in a position to reduce or liquidate positions that move against them. The $25,000 equity requirement recognizes that, despite the level of technology and access they typically enjoy, daytraders with losing positions don't always do so.
In addition, that because daytraders can and do lose faster than other customers as per their level of access, and because they're typically (and logically) trading stocks exhibiting greater volatility, the 25 sticks both (a) increases the risk cushion that broker-dealers have against losing customers eating into their minimum capital requirements, and (b) potentially raises the culpability that "revolving door" operations, those not applying suitability filters, or those with lax risk management procedures have.
It's not, nor should it be, hard to notice sizable losses in accounts with the newly required amount of equity in them, and it provides for the establishment of clear patterns that regulators can more quickly identify in firms that aren't proactive in the aforementioned areas (suitability, risk mgt, etc.)
Those are my off-the-cuff, ever humble assessments.
LPS5 |
