WallStreet's top regulator is preparing to slash the minimum account balancerequired for frequent investing, a move that could open day trading to millionsof investors currently shut out by existing rules.FINRA Weighs Major Changesto Day Trading Rules for Small InvestorsTheFinancial Industry Regulatory Authority (FINRA) is drafting aproposal that would lower the threshold for pattern day trading from $25,000 tojust $2,000. The change would eliminate one of the most complained-aboutbarriers facing retail investors who want to trade stocks and options multipletimes per day.Undercurrent regulations dating back to 2001, investors with less than $25,000 intheir brokerage accounts can make only three day trades within afive-business-day period. Cross that line, and they're banned from additionalmargin trades for 90 days or until they deposit enough cash to reach the$25,000 minimum.Theproposed overhaul would scrap those trading limits entirely. Instead,individual brokerages would set their own minimum balance requirements for daytrading customers, though the draft suggests $2,000 as the new floor.Related: FINRAFines US Tiger $250K and TradeUP $700K for AML and Communication RetentionIssuesTimeline Remains UncertainAccordingto Bloomberg, a group of retail brokerages recently met to review the draftproposal, which could reach FINRA's board for a vote this fall. If approvedthere, the rule change would still need final blessing from the Securities andExchange Commission (SEC),potentially pushing implementation into late 2025 or early 2026.More than50 brokerages and individual investors have already submitted comments toFINRA, which opened the door to rule changes last October. A FINRA spokespersonsaid the regulator has "no update to share at this time" beyond thatinitial request for input.On onehand, the rules from a previous era still apply; on the other, exchanges arepushing tointroduce 24/7 trading, aligning with modern standards andtechnological capabilities.Industry Pushes for ReformBrokeragefirms have been lobbying hard for the changes, arguing that market conditionshave evolved dramatically since the rule's inception during the dot-com era.Back then, stock trades often cost $10 or more per transaction, making frequenttrading prohibitively expensive for small accounts."Today,trading is often commission-free, although not in all securities, and there'sless concern about excessive commission cost," said Haoxiang Zhu, afinance professor at MIT's Sloan School of Management and former SEC official,quoted by Bloomberg.AnthonyDenier, CEO of trading platform Webull Financial, put it more bluntly:"This rule was created at a time when retail investors' access toinformation, pricing and news was greatly disadvantaged. Times have changed andthe rule needs to be changed as well by removing the minimum dollar amountrequirement."Majorbrokerages including Robinhood,Fidelity, and Tastytrade have all written to FINRA arguing that improvedtechnology makes it easier to monitor customer risk in real-time. They sayautomated systems now reject trades when accounts lack sufficient buying power,reducing the chance of catastrophic losses.Critics Warn of IncreasedRiskNoteveryone thinks loosening the rules is wise. The original regulations weredesigned to protect inexperienced traders from borrowing more money than theycould afford to lose."Daytrading on a margin account is risky, and that's why FINRA put this rule inplace," Zhu cautioned.Recentresearch supports those concerns. A 2024 Stanford Graduate School of Businessstudy found that "increasing market access will likely impair retailinvestors' performance". International data is even more sobering - Indianregulators reported this month that 91%of retail investors lose money trading equity derivatives.You mayalso like: BaFinReports 74% of German Retail Turbo Traders Lost Money, €3.4B GoneOptions Trading BoomDrives ChangeThe pushfor rule changes comes asindividual investors have embraced options trading with unprecedentedenthusiasm. The options market has expanded 23% since last June, withretail traders using these derivatives to make leveraged bets on stock pricemovements.Optionsallow traders to control large positions with relatively small amounts ofcapital, amplifying both potential gains and losses. The practice has surgedalongside broader market volatility and uncertainty over trade policies.Ifapproved, the rule change would likely trigger a surge in retail tradingactivity. Lowering the barrier from $25,000 to $2,000 would bring day tradingwithin reach of millions of Americans who currently can't meet the higherthreshold.Thatprospect worries some market observers who remember the meme-stock frenzy of2020-2021, when inexperienced traders piledinto companies like GameStop and AMC Entertainment, often losingsubstantial sums. Online brokerages like Robinhood faced criticism for"gamifying" investing during that period.WhetherFINRA's board will approve the proposal remains uncertain. Even if it does, thelengthy regulatory process means any changes are still months away from takingeffect.This article was written by Damian Chmiel at www.financemagnates.com.