Latest news with #FinancialIndustryRegulatoryAuthority
Wall Street Journal
7 days ago
- Business
- Wall Street Journal
Morgan Stanley's Screening of Wealth-Management Clients Draws More Scrutiny
Morgan Stanley MS -0.31%decrease; red down pointing triangle is being probed by the Financial Industry Regulatory Authority over whether the Wall Street giant properly vetted its clients for money-laundering risks. The probe by Wall Street's self-regulator focuses on the firm's clients, risk ranking and other practices from October 2021 through September 2024, according to people familiar with the matter. It adds to the possible fines Morgan Stanley is already facing from federal investigations into its anti-money-laundering practices.
Yahoo
21-07-2025
- Business
- Yahoo
Day-Trading Restraints to Be Loosened Under Proposed Rule Change
(Bloomberg) -- US regulators are finalizing plans to replace a controversial rule that would dramatically lower a threshold for retail investors to trade equities and options more often. Why the Federal Reserve's Building Renovation Costs $2.5 Billion Milan Corruption Probe Casts Shadow Over Property Boom How San Jose's Mayor Is Working to Build an AI Capital The Financial Industry Regulatory Authority is looking to rework the 'pattern day trading' rule that limits investors with less than $25,000 in their margin account from borrowing to trade four or more times in a five-day period. In a proposal being prepared for Finra's board to eventually vote on, retail investors would need to have only $2,000 in their accounts for such trades. Currently, when an investor with less than $25,000 exceeds the $2,000 margin in borrowing from a brokerage to make equity and options trades, Finra classifies the investor as a pattern day trader, meaning they're prohibited from making excess trades on margin. If the draft proposal goes forward, the three-trade maximum would be eliminated and individual brokerages would make their own margin calculation and decisions as to the minimum balance that customers need to day trade. The existing rule, adopted in 2001, was put in place to protect investors from massive losses and borrowing more than they can cover in holdings or cash. Industry executives say that markets have evolved since, spurring Finra to review the current requirements. 'Today, trading is often commission-free, although not in all securities, and there's less concern about excessive commission cost,' said Haoxiang Zhu, a finance professor at the Massachusetts Institute of Technology's Sloan School of Management and former Securities and Exchange Commission official. 'For this reason, I think a moderate reduction in the minimum margin for pattern day trading is fine, in particular if the reduction applies to securities for which trading is now commission-free.' As Finra considers revising the rule, a group of retail brokerages met to discuss a draft of the proposal that is likely to be submitted to Finra's board in the fall, according to people with knowledge of the matter. If the board approves the proposal, Finra — a self-regulatory organization for broker-dealers — is expected to submit it to the SEC for final approval by the end of the year, the people said, asking not to be identified discussing information that isn't public. SEC Approval More than 50 brokerages and clients have written to Finra, which requested comments on a potential rule change in late October. If the current iteration of the proposal is sent to Finra, it will then go through to an additional comment period before progressing to the SEC. An actual rule change may take as long as a year to implement, according to people familiar with the matter. A Finra representative said the regulator has 'no update to share at this time' beyond the October request for comments. The PDT rule has long garnered complaints from retail investors and their brokerages for being overly restrictive on those with smaller accounts. The market for equity-options contracts has expanded by 23% since last June. Addressing demand growth, brokerages point to improvements in their own risk-management since the rule was put in place more than two decades ago. Any change is likely to open up the market for more retail participation, given the lowering of the day-trading threshold to $2,000. That could garner criticism from those who warn against impulsive day-trading habits, with fewer guardrails against excessive risk-taking. A study from the Stanford Graduate School of Business in 2024 found 'increasing market access will likely impair retail investors' performance.' Outside the US, regulators have flagged their own concerns. The Securities and Exchange Board of India study released this month found that 91% of retail investors report losses from trading equity derivatives. 'Day trading on a margin account is risky, and that's why Finra put this rule in place,' Zhu said. Options Embraced Individual investors have embraced options trading, a type of derivative that gives holders the ability to buy or sell an asset — such as an individual stock or an exchange-traded fund —— at a specific price on or before a certain date. This practice enables traders to bet on the direction of stocks for a fraction of the cost of buying and selling the actual securities. Options trading has soared as tariff-related uncertainty has yet to abate. Seeking quick returns, retail traders have been 'buying the dip,' taking risky bets on price moves comparable to those made during the meme-stock craze that started in 2020. At the time, traders sitting at home funneled their money into equities such as GameStop Corp. and AMC Entertainment Holdings Inc. with little concern for company performance, and many investors lost substantial amounts of money. Online brokerages such as Robinhood Markets Inc. were criticized during the meme-stock boom for 'gamifying' investing, but have since sought to rebrand and target risk-averse customers alongside other clients. Some brokerages and retail traders now see the PDT rule as an antiquated relic of the dot-com bubble, when greater protections were deemed necessary to mitigate risks. Some of these risks involved high trading costs and a lack of customer oversight by brokerages — more of an issue when monitoring software was less sophisticated. Changing Times 'This rule was created at a time when retail investors' access to information, pricing and news was greatly disadvantaged,' Anthony Denier, US chief executive officer of retail brokerage Webull Financial, said in an emailed statement. 'Times have changed and the rule needs to be changed as well by removing the minimum dollar amount requirement.' Brokerages including Robinhood, Fidelity Investments and Tastytrade Inc. wrote in their comment letters to Finra that improved monitoring of trades makes it easier for customers to avoid margin calls — when an account is frozen until the minimum balance is restored —— and that the introduction of zero-commission fees has lowered costs and eased financial risk. Brokers currently reject trades if an account has insufficient buying power and track their clients' positions using automated controls and monitoring systems, allowing customers to manage intraday risk in real time. In today's options market, profits are reliant on incremental price changes, meaning the ability to quickly open and close positions is crucial. 'I think the balance requirement should be ended entirely,' said Cullen Baker, 23, who graduated from Carleton College in June with a degree in computer science. At 18, Baker was unable to trade options due to the rule, and instead ended up trading riskier products such as futures, ultimately 'blowing up' his account, said Cullen, who submitted comments asking Finra to change the rule. 'It's a pointless barrier if you want to figure out how to trade.' Individual investors frequently complain on Reddit forums that the $25,000 minimum is arbitrary, making traders over-allocate capital to their accounts to an extent detrimental to saving, and imposing a barrier for those seen as not wealthy or intelligent enough to trade equity derivatives. Clients can also open additional margin accounts at multiple brokerages to work around the rule, leading brokerages to view it as ineffective. 'It's kind of a silly little rule that gets in the way of freely functioning markets,' said Mark Phillips, founder and principal of Redding, Connecticut-based Harvested Financial, a financial-advisory firm that specializes in options trading. 'If you want people to trade options well and not gamble, they have to learn how to trade.' A Rebel Army Is Building a Rare-Earth Empire on China's Border Elon Musk's Empire Is Creaking Under the Strain of Elon Musk Thailand's Changing Cannabis Rules Leave Farmers in a Tough Spot How Starbucks' CEO Plans to Tame the Rush-Hour Free-for-All What the Tough Job Market for New College Grads Says About the Economy ©2025 Bloomberg L.P. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Bloomberg
21-07-2025
- Business
- Bloomberg
Day-Trading Restraints to Be Loosened Under Proposed Rule Change
US regulators are finalizing plans to replace a controversial rule that would dramatically lower a threshold for retail investors to trade equities and options more often. The Financial Industry Regulatory Authority is looking to rework the 'pattern day trading' rule that limits investors with less than $25,000 in their margin account from borrowing to trade four or more times in a five-day period. In a proposal being prepared for Finra's board to eventually vote on, retail investors would need to have only $2,000 in their accounts for such trades.
Bloomberg
14-07-2025
- Business
- Bloomberg
Junk Bonds Have Never Traded This Much Before, JPMorgan Says
Traders in the $1.4 trillion junk bond market have had a record year: they've never traded this much per day, according an analysis by JPMorgan Chase & Co. Average trading volume for high-yield bonds has hit a record $17.1 billion a day so far this year, a 14% increase from trading volumes last year, JPMorgan analysts including Nelson Jantzen wrote in a note, citing data from the Financial Industry Regulatory Authority.
The Age
29-06-2025
- Business
- The Age
Mystery $50 billion Chinese medical fortune collapses in days
When Yat-Gai Au was worth $US33 billion ($50 billion) on paper, he wasn't in his Hong Kong office. One week later, when his net worth plunged to $US10.1 billion, he wasn't around either. Officers at the headquarters of Regencell Bioscience Holdings said both times that Au made only short visits there, before turning away reporters. The firm, a NASDAQ-listed, Cayman Islands-incorporated traditional Chinese medicine company, occupies the whole ninth floor of a tower in Hong Kong's bustling Causeway Bay, including a reception area with a large table tennis table. Little is still known about the tiny, money-losing company whose shares exploded 82,000 per cent higher and suddenly made Au, its chief executive officer with an 86 per cent stake, richer on paper than some of the city's tycoons like Li Ka-shing. The fleeting nature of its rip-roaring rally has captivated and mystified observers from the US to Hong Kong. Morning Brew, a popular business account on X, flagged its stock move and wondered: 'Is there something I'm missing?' Regulators in the US, which closely monitor wild swings in stock prices, might soon be asking the same question, according to experts. Loading The Financial Industry Regulatory Authority, the watchdog for broker-dealers, has repeatedly said small, cheap stocks are more susceptible to fraud. These companies can be targets for pump-and-dump schemes in which frauds inflate the stock price and quickly sell their shares. The US Securities and Exchange Commission, meanwhile, has been increasingly wary about companies listed on US exchanges that are based overseas, and Regencell checks both boxes. The regulator on June 4 called on the public to weigh in on whether the agency needed to amend the definition of what's called a foreign private issuer, potentially limiting the number of companies that qualify for special status that lets them avoid filing quarterly financial reports or disclosing when executives buy or sell company shares. 'This is an example of very unusual movements in share prices,' said Richard Harris, founder and chief executive of Port Shelter Investment Management in Hong Kong. 'These movements could certainly trigger interest by investigators.'
