If you received a restriction notification, it means your account performed four (4) or more Day Trade operations within a period of five (5) consecutive business days, classifying it as a Pattern Day Trader (PDT). This may result in a restriction on new Day Trade operations, according to FINRA rules (https://www.finra.org/).
Restrictions are applied in two scenarios:
Scenario 1: Investment Account with Total Equity Less than US$25,000
- When an account with total equity less than US$25,000 is classified as a PDT, it results in a restriction on selling operations on the same day as the purchase.
Scenario 2: Investment Account with Total Equity Greater than US$25,000
- For clients with total equity equal to or greater than US$25,000, the PDT classification also applies. However, these clients have access to "Day Trade Buying Power" (DTBP), an intraday trading limit.
How is DTBP calculated?
DTBP is defined based on NYSE Excess, which is a minimum margin for safe trading:
DTBP = [(Invested Value + Account Balance) − (Invested Value × 25%)] × 4
The result of this calculation is the maximum amount you can use to trade assets within the same day.
What happens if the DTBP is exceeded?
It's important to note that each purchase operation performed throughout the day consumes part of the limit mentioned above.
If you exceed your DTBP limit, your account may be restricted from Day Trade operations for up to 90 days.
How to remove the restriction?
To remove the restriction on new Day Trade operations, you have two options for the scenarios below:
If you have less than US$25,000
- Make a deposit sufficient for the total account balance to exceed US$25,000.
If your total account balance exceeds US$25,000
- Wait for the 90-calendar-day period for the restriction to expire automatically. After the unblock, your account may be restricted again if you perform more Day Trade operations;
- Make a deposit or sell assets so that the credited amounts can cover the excess Day Trade Buying Power used.