What Happens When Your Pattern Day Trader Account Goes Below Minimum Equity Requirement
I am moving money between my E-Trade account and my TD Ameritrade account. E-Trade account has been a Pattern Day Trader account (day trading more than four times in five business days). I am turning my TD Ameritrade account into a Pattern Day Trader account while using the E-Trade account for longer period trades and, perhaps, options. E-Trade account is getting close to the $25000 minimum; I may even withdraw to below it. I get the following warning message, which explains what happens when you try to get out of the Pattern Day Trader status:
"Pattern Day Trader Account Restriction Warning
Your Pattern Day Trader account XXXX-0882 could go into a minimum equity call if the net account value closes below $25,000. Please be aware that if the net account value in a Pattern Day Trader account closes below $25,000, the account may be restricted to cash-only transactions for 90 days or until the minimum equity call is met. This will also cause further restrictions from day-trading in the account while this restriction is in effect.
I haven't day traded with the E-Trade account for two weeks. I may call E-Trade and have them convert my account out of a Pattern Day Trader account. The following is E-Trade's explanation for minimum equity requirements:
"Know the minimum equity requirements for pattern day trading
Regulations call for a $25,000 minimum equity requirement for pattern day traders. This is designed to address the additional risks inherent in leveraged day trading activities, and to ensure you're able to cover any losses incurred in your account from the previous day before you place new day trades.
If your equity falls below $25,000, a day trading minimum equity call will be issued on your brokerage account requiring you to deposit additional cash or securities. Account equity is calculated based on the closing prices of securities on the previous market day.
If you execute a day trade (buy and sell the same stock or option on the same trading day) before a day trading minimum equity call is met, your account will be immediately restricted to cash-only transactions for a period of 90 days or until the call is met in accordance with FINRA Rule 4210.
Wed, 02 Dec 2015 11:26:50 -0800
I didn't bother to call E-Trade to convert my account back to a non-day trading account. I did't know if that was possible or not. But this week, I withdrew some money, so my account is below the $25000 minimum. Today, I got the following account alert:
"You have a Minimum Equity Call
The net account value in your pattern day trading account has fallen below $25,000, and a minimum equity call has been issued for the account. FINRA Rule 4210 requires that pattern day traders maintain a minimum account balance of $25,000.
Account ending in: XXXX-0882
Equity call deadline: Immediately
You can meet this call in either of these two ways:
By depositing additional funds and/or securities into your account
By your account equity rising above $25,000 due to market appreciation or trading.
Your account will be restricted to trading 1x house excess for 90 days or until the call is met. Please note that if you execute a day trade while this call is in effect, FINRA regulations require that we further restrict your account to settled, cash-only transactions.
If you have questions or need assistance, please call us anytime at 1-800-ETRADE-1 (1-800-387-2331) or send us a Secure Message."
Wed, 13 Jan 2016 09:32:07 -0800
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