FINRA Votes to Overhaul Pattern Day Trading Rule, Stocks Set to Benefit

Interactive Brokers (IBKR) and Robinhood Markets (HOOD) are set to benefit from the proposed Pattern Day Trading (PDT) rule change, which would shift to a standard intraday margin framework. IBKR, a go-to choice for advanced traders and investors, has already seen a 56% YTD gain and closed at a fresh all-time high. HOOD, which revolutionized trading with its commission-free model, has surged 266% YTD and also closed at a new high. Charles Schwab (SCHW), with its popular thinkorswim platform and 37 million accounts, could also be a beneficiary of the rule change.

The Financial Industry Regulatory Authority (FINRA) recently voted to overhaul the Pattern Day Trading (PDT) rule, which required a $25,000 minimum account balance to execute four or more same-day trades in five business days. The new rule, pending final approval by the SEC, would shift to a standard intraday margin framework. This change could unleash a retail trading boom, boosting volumes in volatile penny stocks and the platforms enabling them. While penny stocks may see action, brokerages and retail favorites are likely to be the more prominent beneficiaries of the end of the PDT rule.

Interactive Brokers (IBKR) and Robinhood Markets (HOOD) are set to benefit from this proposed rule change. IBKR, a go-to choice for advanced traders and investors, has already seen a 56% YTD gain and closed at a fresh all-time high. HOOD, which revolutionized trading with its commission-free model, has surged 266% YTD and also closed at a new high. Charles Schwab (SCHW), with its popular thinkorswim platform and 37 million accounts, could also be a beneficiary of the rule change.

The new rule could drive a surge in new users and trading volume, particularly for platforms like Robinhood and Interactive Brokers. IBKR's robust growth in September, with a 47% year-over-year increase in daily average revenue trades and a 40% increase in client equity, highlights its potential to capitalize on the rule change Interactive Brokers (IBKR) Sees Significant Growth in September Metrics^[3]. Similarly, HOOD's strong performance, with a 266% YTD gain and a market capitalization of about $108.2 billion, demonstrates its ability to attract and retain a large user base HOOD Stock Soars 12% as Robinhood Hits $4B Prediction Trades^[2].

While the rule change could benefit these companies, it also comes with potential risks. The new rule may lead to increased volatility and speculative trading, which could impact the financial health of these brokerages. However, with their strong user bases and robust platforms, IBKR and HOOD appear well-positioned to capitalize on the opportunities presented by the rule change.