# The End of the PDT Rule: Scott Sheridan's 7-Year Fight to Kill It

> Scott Sheridan spent years pushing FINRA to end the $25,000 pattern day trader rule. He explains how it happened and his view of the new $2,000 minimum.

- URL: https://optionomega.com/blog/pdt-rule-repeal-story/
- Published: 2026-06-05
- Author: Dan Sheridan (Options mentor and former CBOE market maker), Troy McNeil (Founder, Option Omega)
- Featuring: Scott Sheridan (Co-founder of Lossdog)
- Topics: Interview, 0DTE, Risk Management
- Video: [He Spent 7 Years Killing the PDT Rule — Here's What Actually Happened](https://www.youtube.com/watch?v=UsSmVvHl4yE)

## Key points

- The pattern day trader (PDT) rule limited securities accounts under $25,000 to three day trades in a rolling five-business-day period; it was replaced on the day of this conversation, with brokers phasing in the change through October 20, 2027.
- Scott Sheridan started the push in 2018, grew support from about 10–12 firms to about 50 supporters, and took the case to both FINRA and the SEC.
- About three years before the interview, enforcement tightened to one reset for life, which Scott compares to losing your driver's license forever after a second ticket.
- His understanding is that the new minimum is $2,000, and day trade calls are gone too; he stresses this lets traders trade more if they want to, not take more risk.

For nearly 25 years, the pattern day trader (PDT) rule kept accounts under $25,000 to three day trades in any rolling five-business-day period. On the day this conversation was recorded, it ended. FINRA's replacement rules took effect June 4, 2026, but brokers have until October 20, 2027 to phase them in, so the rules at any given broker depend on when it adopts them. Scott Sheridan calls it "the biggest change to retail trading probably in the last 25 years, if not ever."

Scott, a pioneer at thinkorswim and Tasty and now co-founder of Lossdog with Tom Sosnoff, led the industry effort to get rid of the rule. Dan Sheridan (no relation) and Troy McNeil asked him to tell how it happened, from the first phone call in 2018 to the day the rule went away, and what he thinks the change means for small accounts.

## What the PDT rule was

The rule applied to securities accounts: stocks, equity options and index options. Futures and crypto were never included, which Scott calls "part of the craziness of the rule."

| Rule detail | How it worked |
| --- | --- |
| Who it applied to | Securities accounts under $25,000 at the start of the day |
| Limit | Three day trades in a rolling five-business-day period |
| What counted as a day trade | Opening and closing the same position on the same day |
| Multi-leg trades | An iron condor opened and closed as a package counted as one day trade, not four |
| Fourth day trade | Triggered an equity maintenance (EM) call from the firm's risk team |

Unless you had a reset available, an EM call shut down your day trading for a period of time. You could clear it right away by bringing the account back over $25,000, but as Scott put it, most people don't have that cash lying around.

## How the fight started

In 2018, a contact who was then president of SIFMA, an industry group, called Scott and asked what the organization could do for him. Asked for his biggest customer pain point, Scott did not hesitate: pattern day trading.

The first answer from SIFMA's committee was interest but no volunteers, because members were wary of their legal and compliance departments. JJ Kinahan, then at TD Ameritrade's thinkorswim, asked to join the fight, and Scott counted on him to work with regulators and, eventually, Congress.

Over a couple of years they gathered about 10–12 firms and pitched FINRA's 4210 committee in New York. FINRA admitted the PDT rule was its number one customer complaint, but said changing it was not under its purview. It pointed them to the SEC. A couple of weeks later, the group met the SEC, which said it was a FINRA issue.

## COVID and the meme stock setback

Days later, COVID locked everything down. Then came the meme stock craze. Scott told JJ the effort might be dead: regulators had just lived through that, and the group was asking them to ease restrictions and let people trade more. They let it sit.

## "One reset for life"

According to Scott, the rule left a lot of room for interpretation, and each clearing firm and broker read it through its own legal and compliance team. As he described it:

- **Apex (Tasty's clearing firm) and Interactive Brokers:** after a violation you got a reset. Violate again, and you waited three months.
- **Schwab, Fidelity, E*Trade and TD Ameritrade:** the wait was a year.

Then, about three years before the interview by Scott's estimate, it got much worse. FINRA said it changed only the enforcement; Scott calls that "massive BS." The new standard was one reset for your entire life.

His analogy: he rolls through a stop sign and gets a ticket. That is his warning, his reset. Five years later he gets a speeding ticket, and he can never drive in Illinois again. His example of a workaround was to violate at one broker and move to the next, losing about a week each time to transfer the account and learn a new platform.

That is when Scott told JJ they had to "fire up the machine again."

## How it finally got done

This time the coalition grew to about 50 supporters: retail brokers, exchanges, market-making firms and clearing firms. Scott gave FINRA rare credit for getting it right. Once he saw the direction the person in charge was taking, he told Chris, who ran the risk and margin team at Tasty, "We're going to get this done."

By mid-September 2025 it was basically done, but it still had to go through a comment period, which is why the change took effect on the day of this conversation. Scott learned of the outcome a day before he and Tom told the Tasty team they were leaving, and used it as his "mic drop moment."

## What changes now

Scott's first point: **this does not mean you need to trade more.** It means you can. You can close a trade when you want to without counting day trades. He compares it to portfolio margin: worth having even if you rarely use it.

It also does not give you more leverage or more risk. Margin requirements still apply, set by exchanges and the OCC and sometimes raised by clearing firms and brokers.

### The new $2,000 minimum

Scott's understanding, which he said to confirm with your own broker, is that you now need $2,000 in the account. That is the threshold for buying stock on margin. With $2,000, he said, you could trade a call debit spread that costs $100 or $200, or a credit spread as long as you can cover its margin.

When regulators floated raising or lowering the threshold, Scott's response was to just get rid of the rule, since any threshold admits the rule is no good. Even so, going from $25,000 to $2,000 was "a huge win."

### Day trade calls are gone

Day trade calls were issued when you day traded on profits rather than your starting balance. Scott's example: start with $50,000, make $10,000, and day trade on the $60,000. That extra $10,000 generated a call, and calls built on each other. They are gone too, a by-product the group was not even pushing for.

One story from the FINRA meeting stuck with him. An E*Trade representative described a $10,000 account that had used its three day trades, bought Tesla calls, and was up $3,000. The customer called and asked the firm to just take the position, because they could not close it and did not want the weekend risk.

## Why the rule existed

The rule came from the late 1990s, before the dot-com bust, when strip-mall day trading rooms let people trade large positions with small deposits. Regulators worried about who would cover the losses if everyone in the room was in the same stock and it collapsed. Regulators also leaned on a Senate subcommittee study from, Scott thinks, the 1980s, which said commissions eat too far into small, frequent trades. Scott told FINRA that commissions have basically gone to zero.

### The unintended shift to futures options

Troy said that 10–12 years ago, as a software developer new to options without much money, he traded ES options because PDT did not apply, and that in hindsight he shouldn't have been doing that. In his view the rule pushed many traders toward riskier instruments. Scott agreed, and named the CME as a "loser" from the repeal: many small traders moved to ES and NQ options because they could not day trade SPY. He likes those products, but says traders should not be forced into them.

## Lossdog

Scott and Tom's new venture, Lossdog, aims at income inequality. Users upload a resume and its AI model, built on millions of data points including Bureau of Labor Statistics data, returns a single number for what they are worth. By Scott's numbers, S&P 500 CEO pay was about 20 times the average employee's in the 1980s and 1990s, and about 650 times in the year before the interview. Lossdog also has a portfolio scanner and AI trade idea tools.

## Key takeaways

1. **The $25,000 PDT rule has been replaced.** Scott's understanding is that $2,000 is the new minimum. Brokers can phase the change in through October 20, 2027, so the timing depends on the broker.
2. **Day trade calls are gone too.**
3. **In Scott's words, you can trade more, but you don't have to.** The change doesn't add leverage, and margin requirements still apply.
4. **It took about 50 industry supporters** and years of back-and-forth between FINRA and the SEC.
5. **Scott and Troy see the change as removing a reason small accounts turned to futures options** to trade intraday.

## What this means for small accounts

Once a broker has adopted the new rules, smaller accounts there can open and close 0DTE trades on the same day without counting day trades. Tammy Chambless shared how she would size a [MEIC for a small account after the PDT change](https://optionomega.com/blog/tammy-chambless-meic-0dte-iron-condors-2026/), and JJ Kinahan, who worked on this effort, talks through [position sizing and two spreads](https://optionomega.com/blog/jj-kinahan-position-sizing-two-spreads/). Before trading a strategy at a smaller size, you can [backtest it](https://optionomega.com/features/backtesting/) with your own width, credit and account size.

**[Start a free trial](https://optionomega.com/pricing/)**

*Watch the full video: [He Spent 7 Years Killing the PDT Rule — Here's What Actually Happened](https://www.youtube.com/watch?v=UsSmVvHl4yE).*

*This post summarizes a conversation from June 2026 and is educational only. Options trading involves substantial risk.*