New Day Trading Rules Effective 8/27/01 The Securities and Exchange Commission has approved amendments to NYSE Rule 431 (Margin Requirements) establishing new requirements to address the intraday risks associated with day trading in customer accounts. Below are some summarized highlights from those rules that should be carefully considered if you intend to utilize this strategy. As this is only a summary, please call us if you have any questions. 1. Definition of a Day Trade   A daytrade is defined as a buy and sell of the same security on the same day. 2. Definition of a "Pattern Day Trader"   A "Pattern Day Trader" is defined as a customer who executes four or more day trades within five business days, provided the number of day trades is more than 6% of the total trades in the account during that period. 3. Minimum Equity in a Day Trading Account   Under the rules, the minimum equity requirement for pattern day traders is $25,000.00. If a customer engages in "pattern day trading", and does not meet the minimum equity requirement, a call will be issued to bring the account up to $25,000.00 minimum equity. If the call is not met, the account will become restricted. 4. Day Trading Margin Requirements   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. Maintenance excess is the equity in your margin account less the maintenance requirements on the positions that you hold. This should not be confused with buying power, and if you need assistance, you should always call your broker. Liquidations of existing positions will not increase your day trading buying power. If a customer exceeds his or her intraday buying power, a day trading call will be placed on the account. These calls must be met with a deposit of funds. As long as a day trading call is outstanding, the customer is no longer able to use 4 times the maintenance excess, and will be restricted to two times maintenance excess until the call is met. Clients will have up to 5 business days to meet a day-trading call. If the call is not met with a deposit of funds, the account will become restricted. All buys in a cash account must be paid for in full using settled funds. You cannot use the proceeds from the sale of a security purchased the same day to make another purchase in a cash account. If you day trade, we suggest that you read: Day Trading: Your Dollars at Risk, which was originally published by the SEC, and available on our websites Learning Center.