Is there a reason why NASDAQ limits trading to 5 trades per week if you have less than $25,000 ?

Question

I was looking into some day trading and noticed they limit you to 5 trades per week if your liquid assets are less than $25,000. Why are they keeping the small investors out of the market like that? Seems shady.

Answer 1

The limit is 5 day trades per week, not 5 trades per week.

Although it may not be obvious, day-trading creates certain risks for brokerages and exchanges as well as the individuals doing the trading.

The higher account requiremens reduce the risks for brokerages and exchanges. For more information see

http://www.nasd.com/web/groups/rules_regs/documents/notice_to_members/nasdw_003881.pdf

Answer 2

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Answer 3

The basic rule is here from Fidelity....

Day trading is defined as buying and selling the same security (or executing a short sale and then buying the same security) during the same business day in a margin account. “Pattern day traders,” as defined by NYSE and NASD rules must adhere to specific guidelines for minimum equity and meeting day trade margin calls.
For more information regarding NASD's guidelines for day traders, go to www.nasd.com.

Pattern Day Trader

The term pattern day trader defines an account that:
Executes four or more day trades within a five-business-day period, or
Incurs two unmet day trade calls within a 90-day period
A non-pattern day trader account, or an account with only occasional day trading, becomes designated a pattern day trader if it meets either of the above criteria.

Minimum Equity Requirements for Pattern Day Traders
Pattern day traders must maintain a minimum equity of $25,000 in their margin account at all times or the account will be issued a day trade minimum equity call. If the day trade minimum equity call is not met, then the account's day trading buying power will be restricted for 90 days.
For day traders not classified as pattern day traders, the requirement is the usual $5,000 initial investment required by all Fidelity brokerage accounts.

It comes from the SEC's day trading rules. Depending on how often you go over the limit gets you classified as pattern or not. Depending on your classification the minimum equity applies. The broker is likely to lean much closer to pattern than non-pattern.

Answer 4

That's your broker doing that not NASDAQ.

Answer 5

That simply is not true. Your source of information is borked.