Information Memo 2

The amendments redefine the term "day trading" to treat the sale of an existing position held

from the previous day as a liquidation, and the subsequent repurchase of that position as the

establishment of a new position not subject to day trading margin requirements.

• Day trading margin requirements – For day trades in equity securities, the day trading margin

requirement shall be 25 percent of either: (1) the cost of all day trades made during the day;

or (2) the highest open position during the day. If a customer's day-trading margin

requirement is to be calculated based on the highest open position during the day, the

customer's member organization must maintain adequate "time and tick" records

documenting the sequence in which each day trade is completed. "Time and tick"

information provided by the customer is not acceptable.

• Day trading buying power will be calculated based on the customer's account position as of

the close of business on the previous day. The amendments limit day trading buying power

to four times the day trader's maintenance margin excess. See Rule 431 (f)(8)(B)(iii).

• Day trading margin calls – A pattern day trader exceeding his day trading buying power

results in a special maintenance deficiency. Member organizations are required to issue a

day-trading margin call to cover the amount of the deficiency. Pattern day traders have five

business days to deposit funds to meet this day trading margin call. The day trading account

is restricted to day trading buying power of two times maintenance margin excess based on

the customer's daily total trading commitment, ["time and tick" can not be used during this

period] beginning on the trading day after the day trading buying power is exceeded until the

earlier of when the call is met or five business days. If the day trading margin call is not met

by the fifth business day, the account must be further restricted to trading only on a cash

available basis for 90 days or until the call is met. See Rule 431 (f)(8)(B)(iv)(2) & (3).

• Pattern day traders will be prohibited from utilizing cross guarantees to meet day trading

margin calls or to meet minimum equity requirements. See Rule 431 (f)(8)(B)(iv)(4).

• Deposits of funds to meet minimum equity requirements or to meet day trading margin calls

must remain in the customer's account and cannot be withdrawn for two business days. See

Rule 431 (f)(8)(B)(5).