Robinhood Markets (HOOD) shares climbed between 6% and 8% in Wednesday pre-market trading. The U.S. Securities and Exchange Commission (SEC) approved a proposal to eliminate the pattern day trader rule.
The previous regulation required investors to maintain a $25,000 minimum margin balance. This rule applied to users making more than four day-trades within a five-day period.
Analysts expect the removal to increase trading activity among retail investors with smaller account balances. A new framework will implement margin standards based on real-time risk exposure for all investors.
This shift lowers the barrier to entry for active trading. The change serves as a significant tailwind for retail-focused brokerages like Robinhood.