Online brokerage stocks moved higher yesterday after a landmark regulatory change officially took effect, as the Financial Industry Regulatory Authority (“FINRA”) eliminated the long-standing pattern day trader (PDT) rule.
The move removes the requirement that traders must maintain at least $25,000 in their accounts to engage in frequent day trading. Investors welcomed the development, sending shares of brokerages such as Robinhood Markets HOOD, Webull Corporation BULL, eToro Group ETOR, Charles Schwab SCHW and even crypto-native platforms like Coinbase Global COIN higher, reflecting expectations of increased retail trading activity and stronger brokerage revenues.
25-Year-Old Barrier Comes Down
The PDT rule was introduced in 2001 following the dot-com crash to limit excessive risk-taking by retail investors using margin. Under the framework, traders making four or more-day trades within five business days were required to maintain a minimum account balance of $25,000 or face trading restrictions.
The new rule eliminates the account-size threshold, the trade-counting mechanism and the “pattern day trader” designation altogether.
Instead, brokerages will now rely on real-time monitoring systems that assess actual intraday portfolio risk.
While the $25,000 requirement disappears, existing safeguards such as the $2,000 minimum margin requirement and the 25% maintenance margin standard remain in place.
Brokerages Poised to Gain From Increased Retail Activity
The rule change is expected to reshape competition among brokerages, with firms that have invested in advanced risk-monitoring systems likely to attract more active traders. Platforms with large self-directed retail client bases, such as Robinhood and Webull, appear particularly well-positioned to benefit, while established players like Schwab could see greater use of their active-trading and margin offerings.
eToro and Coinbase may also benefit as easier market access encourages broader retail participation.
By removing the $25,000 account minimum, FINRA has made active trading accessible to a much larger pool of investors. As more traders engage in stocks, options and short-term trading strategies, brokerages could see a meaningful increase in trading volumes and customer activity.
Higher engagement is likely to support growth in key revenue streams, including payment for order flow, margin lending, premium subscriptions and trading-related services. The change may also help brokerages attract customers, improve retention and increase long-term customer value, providing a tailwind for revenue growth across the retail brokerage industry.
Currently, SCHW carries a Zacks Rank #2 (Buy), whereas COIN, BULL and ETOR have a Zacks Rank #3 (Hold). HOOD, however, carries a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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The Charles Schwab Corporation (SCHW): Free Stock Analysis Report
Coinbase Global, Inc. (COIN): Free Stock Analysis Report
Robinhood Markets, Inc. (HOOD): Free Stock Analysis Report
Webull Corporation (BULL): Free Stock Analysis Report
eToro Group Ltd. (ETOR): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).