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If the government really wanted to protect us from ourselves they would limit gambling, which costs poor people a lot and is known to result in unfavorable odds, and they would discontinue the lottery. Instead because the lottery and gambling make the government and big institutions money they are legal. Restricting pattern day trading is, likewise, an attempt to give those with money more leverage over those without money. This law directly discriminates against those without money and it was passed by those with money. The government has essentially passed two sets of laws, one for the rich and one for the poor.
These laws were undemocratically passed by the rich for the rich under the false pretense of protecting the poor. Such is a hallmark of an aristocracy. No nation should have a different set of laws for the rich than for the poor.
The entire Wikipedia article, especially all the criticisms, are worth reading.
FINRA (formerly National Association of Securities Dealers, Inc. or NASD) rule applies to any customer who buys and sells a particular security in the same trading day (day trades), and does this four or more times in any five consecutive business day period; the rule applies to margin accounts, but not to cash accounts. A pattern day trader is subject to special rules. The main rule is that in order to engage in pattern day trading you must maintain an equity balance of at least $25,000 in a margin account.
[...] The SEC believes that people whose account equity is less than $25,000 may represent less-sophisticated traders, who may be less able to handle the losses that may be associated with day trades.
(Score: 2) by andersjm on Monday May 15 2017, @04:48PM (2 children)
The counterargument is that although liquidity has value, that value is a tiny fraction of the money being exfiltrated. The average price is so much more important than the deviation, and the professional zero-sum gamers lower the average price you get on selling and raise the average price you pay on purchase.
(Score: 0) by Anonymous Coward on Monday May 15 2017, @05:20PM (1 child)
No. With increased liquidity caused by HFT, the benefits of small bid/ask spreads dwarf any fractional HFT tic that may (or may not) be detrimental/beneficial to the small, non-HFT trader. Keep in mind that HFT price moves are tiny and that they occur both up and down, so there is usually never a significant cumulative effect in price from HFT.
Furthermore, "average price" means absolutely nothing when there is no liquidity and the bid/asks spreads are large, because you wouldn't be able to trade anywhere close to the "average."
By the way, bid/ask spreads ballooned to 9% in Canada when they tried to restrict HFT trades, so some Canadian mom/pop, buy/hold traders could have lost 9% on their "life savings" trade, because of reduced liquidity in the HFT-lacking markets. 9% is a lot compared to a tiny, last-millisecond HFT tic that might (or might not) be detrimental to a closing trade.
(Score: 0) by Anonymous Coward on Tuesday May 16 2017, @03:59AM
> HFT price moves are tiny and that they occur both up and down, so there is usually never a significant cumulative effect
Uh. That's not really how this works. If there's an agreeable price, and half the time I take money from the buyer, and half the time from the seller, the sum does accumulate.
> Furthermore, "average price" means absolutely nothing when there is no liquidity and the bid/asks spreads are large, because you wouldn't be able to trade anywhere close to the "average."
Uuuuuh. You can't trade (well, sell) at price+dividend either yet that's a useful metric especially just before a pay. Average price would still have both meaning and value, without HFT.
> some Canadian mom/pop, buy/hold traders could have lost 9% on their "life savings" trade
...you are trying to suggest people put all their eggs in one basket to hold onto? Have I just wasted my time explaining to someone who could never understand reality?