The NASD and NYSE, as part of a small investor protection agenda, instituted regulations intended to limit the amount of trading that can be done in accounts with small amounts of capital, specifically accounts with less than 25’000 USD equity.

Overview of Pattern Day Trading ("PDT"):

• Day Trade: any trade pair wherein a position in a security (stock, bond or stock option) is increased ("opened") and thereafter decreased ("closed") within the same trading session.

• Pattern Day Trader: someone who effects 4 or more Day Trades within a 5 business day period. A trader who executes more than 4 day trades in this time is deemed to be exhibiting a ‘pattern’ of day trading and is thereafter subject to the PDT restrictions.

• In order to day trade, the account must have at least 25,000 USD in equity, where equity includes cash and stock, but does not include option or warrant value.

• The NYSE regulations state that if an account with less than 25,000 USD is flagged as a day trading account, the account must be frozen to prevent additional trades for a period of 90 days. SONRAY GLOBAL has created algorithms to prevent small accounts from being flagged as day trading accounts, to avoid triggering the 90 day freeze. SONRAY GLOBAL implements this by prohibiting the 4th opening transaction within 5 days if the account has less than 25,000 USD in equity.
Special Cases

• Accounts that at one time had more than 25,000 USD, were identified as accounts with day trading activity, and thereafter the equity in the account dropped below 25,000 USD, may find themselves subject to the 90 day trading restriction. The restrictions can be lifted by increasing the equity in the account or following the release procedure described below.

• The proceeds of an option exercise or assignment will count towards day trading activity as if the underlying had been traded directly. Deliveries from single stock futures or lapse of options are not considered part of a day trading activity.

Additional details relating to PDT regulations and SONRAY GLOBAL’s implementation of these rules can be found in the following FAQ.

Examples of Day Trades:

-On Monday, 1000 shares of XYZ stock are purchased. Later on that same day, 1000 shares of XYZ stock are sold. This is considered to be a day trade.

-On Wednesday, 1000 shares of XYZ stock are purchased. Later on that same day, 500 shares of XYZ stock are sold. This is considered to be a day trade.

-On Monday, 500 shares of XYZ stock are purchased. Later on that same day, another 500 shares of XYZ are purchased. In after hours trading on Monday, 1000 shares of XYZ are sold. This is considered to be 1-day trade.

-On Monday, 500 shares of XYZ stock are purchased. On Tuesday, another 500 shares of XYZ stock are purchased. Later on Tuesday, 500 shares of XYZ stock are sold. This is considered to be 1-day trade.

-On Thursday, 500 shares of XYZ stock are purchased in pre-market. In afterhours trading on Thursday, 200 shares of XYZ stock are sold. This is considered to be a day trade.

-On Monday, customer sells short 10 YXX September 2005 90 calls and simultaneously buys 10 YXX December 2005 95 calls (combination order type). Later on Monday, customer buys back 5 YXX September 2005 90 calls and sells 5 YXX December 2005 95 calls for a profit. This is considered to be 2 day trades (one day trade for each leg of the spread).

-On Thursday, customer buys 500 shares of YXZ stock. Later on Thursday, customer sells 1500 shares of YXZ stock (reversal creates new short position). On Friday, customer purchases 1000 shares of YXZ stock. This would be considered to be 1-day trade.

Non-Day Trade Examples:

-On Monday, 500 shares of XYZ stock are purchased. On Tuesday, another 500 shares of XYZ stock are purchased. On Wednesday, 1000 shares of XYZ stock are sold. None of these are considered to be day trades.

-On Thursday, customer buys 500 shares of YZZ stock. On Friday, customer sells 500 shares of YZZ stock. Later on Friday, customer buys 500 shares of YZZ stock. This is not considered to be a day trade.

-On Friday, 1000 shares of XYZ stock are purchased. On the following Tuesday, 1000 shares of XYZ stock is sold. This is not considered to be a day trade.