The NASD got tired of recieving thousands of complaints from day traders during the tech boom who lost money on all their trades. Bunches of IT guys quit their jobs to go daytrade NSCP and YHOO and every time they lost on a trade, (which was nearly every trade), they would complain to the NASD about those dirty rotten "they's" that screwed them out of their money. The NASD noticed that most of these complaints came from pikers so they shut the pikers down by fining brokers who did not enforce the PDT rules which were already on the books. My broker, Scottrade, was fined $800K for allowing people like me to daytrade without the required amount of cash in the account. Ironically, the clampdown came right around the time I started slapping stocks around and consistently making money. So that's who you can blame - the complainers who couldn't accept responsibilty for their losses. The rule was always there, it was just never enforced. The new rule simply re-worded the old one. People should be free to lose money in the market, but there's another side of that coin and that is that the regulators should be able to do their assigned jobs without wasting time catering to whining complainers. If I were the head of the NASD at that time, I would have done the same damb thing to get the complainers out of my hair so I could keep a better eye on the Enron's in the market.
I second it only to a certain degree. Here is why: How about trading in a simulation account while trying to learn the "knack" of it? It's there for a reason. Traders have to be aware that the risk remains identical with any instrument if they lack the fundamental knowledge on how markets move. So whether you trade futures or a few stocks, the risk does not change, only the amounts vary.
This rule actually makes things worse. I don't know a single trader (with 5 years or more experience) that didn't blow out their account at least once. So basically they are making it so you have to blow out 25k vs maybe 5 or 10. How stupid is that ?
The PDT rule was formed for all the traders with $5,000 in actual cash, to go out and zap all their credit cards and HELOC's to come up with the $25K total to trade unencumbered. This was another credit bubble formation as directed by another brilliant government agency that is always there to be our best friend and help us all out. PDT rule does nothing of any substance that can ever be proven of any good.
In our country you live by our laws. US has no obligation to foreigners who are not even citizens interfering with our rules and regulations.
Investing in one thing, building wealth through asset ownership, but gambling is another addiction. Most gamblers try Options markets too and lose. Day traders with less than 25K lose most frequently. Life of an average day trader 6 months.