Regulators rolled back a two-decade constraint in June, removing FINRA's pattern day trader designation. Put simply, the old rule limited frequent same-day trading for margin accounts under $25,000. FINRA originally adopted it in 2001 after the dot-com bust to curb short-term risk for broker dealers and, over time, it became a brake on rapid intraday bets by smaller accounts.
Brokerages pushed for the repeal, arguing that real-time tech now lets firms and clients watch and manage risk more effectively. The timing also met a receptive market backdrop, with stock indexes hovering near highs and social media funneling first-timers into trading.
The rule only applied to margin accounts, which let customers use borrowed cash and offer other features. Many apps default to margin status, so even users who never borrow often end up in these accounts because they can buy and sell without waiting for earlier trades to settle.
That default helped the rule touch a wide slice of retail. With the cap gone, small accounts face fewer frictions to place multiple same-day trades.
Trading snapped higher almost immediately. Robinhood said its average daily trades in August rose 31% in stocks from a year earlier, while options activity advanced 67% on the same basis. Webull reported the average daily count of revenue-producing trades climbed by over 70% for both stocks and options.
Webull President Anthony Denier called the change "the defining event for the quarter" that drove heavier volumes and record quarterly results, adding "Volumes will not revert to pre-PDT levels." Robinhood CFO Shiv Verma told investors in late July that the shift should remain a tailwind beyond the current quarter. Robinhood reports third quarter results on Oct. 27, while Webull has yet to set a date.
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In September, researchers affiliated with other US universities and the University of South Florida estimated that retail options activity rose by as much as 24% following the rule being scrapped, with out-of-the-money contracts nearing expiration seeing the biggest bump. The authors said the findings align with concerns that loosening trading limits can spur retail speculation.
Some investor advocates say the repeal blurs investing with wagering. At Better Markets, Benjamin Schiffrin, who oversees securities policy, said, "Another example of making it easier for people to blur the line between investing and gambling." He also warned of "this kind of anything-goes atmosphere" and said protections are being chipped away, pushing activity toward "pure speculation and trying to get rich quick."
State regulators took a similar stance ahead of the change. The North American Securities Administrators Association, a group for state securities regulators, argued last year against ending the rule, citing limited resources and knowledge among younger traders. The group cited a 2024 FINRA survey in which about three fourths of margin users missed a basic question on the mechanics of leverage. That same survey found margin is used far more by younger investors, with over 20% of those under 35 saying they had borrowed to amplify trades, versus under 4% among investors older than 55.
Meanwhile, trading itself is speeding up. Major US exchanges plan to launch overnight sessions in December, stretching the trading day and giving retail more hours to act.
For anyone using app-based brokers and margin accounts, the guardrail that once capped frequent same-day trading in smaller accounts is gone. Platforms report heavier stock and options flow, and new research shows the fastest growing slice is short-dated, out-of-the-money options that regulators associate with speculation. The bottom line: freedom to trade more often is up, and so is short-term risk, especially for newer and younger investors.
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