Mackenzie Burn
Baltimore Watchdog Staff Writer
The recent stock market drama involving GameStop has many Baltimore residents fuming over the unfairness, even borderline racist, policies of the financial industry that uses income to limit participation in stock trading.
Day trading is the act of buying and selling stocks at a quicker rate. A key rule of this practice is that participants “must maintain equity of $25,000 on any day that the customer trades.” With practice, people are able to make day trading their primary source of income.
However, in Baltimore, the per capita income of city residents in the past year was $27,048, according to the U.S. Census Bureau. So, the average Baltimore resident would have to save almost every paycheck for an entire year just to participate in this lucrative opportunity.
Day trader Ashan Williams, a Baltimore resident and Morgan State University graduate, described the so-called “pattern day trading rules” as “a big barrier.”
“How do you expect us to have $25,000 at any given moment when a good job in Baltimore would be considered $30,000 a year?” Williams asked, explaining that as someone who was a part of stock groups, he found the rule disrespectful to everyone in the inner city.
Members of the reddit group agreed, speculating that the rule was in place “to keep poor people from making money on the stock market.” Reddit, as a forum shaped by a distrust of Wall Street, has long existed for amateur traders to discuss profitable stock purchases or risky, high-reward bets, officials said.
“There is a bit of market feudalism here,” said Swing Trader Will Wagner, who described the 20-year-old rule as “detrimental to small traders.” “Large market players are a bit like casino operators… they want the money entering the market but not leaving.”
About 20 participants in a Social Media conversation expressed their discontent with the rule, which was initiated in 2001. They challenged the Financial Industry Regulatory Authority (FINRA), which stresses that the rule was originally initiated as a precaution to limit risk for traders.
“Most of us are aware of the risk and would invest accordingly,” some said in the online conversation.
One redditor asked, “Just because some are irresponsible or incautious, all must be locked out?”
Wagner, a former Day Trader before he switched, said the rule in place by FINRA is to “reduce risk” but actually “it handicaps small traders in terms of risk management.”
Williams agreed that the rule designed to control risk should vary depending on one’s own income or vary state to state.
“How can you control the risk for someone in Nebraska making $100,000 the same as someone in Baltimore or Philadelphia making maybe $18,000?” Williams asked.
Angelita Williams, director of strategic communication for FINRA, refused to comment on the policy that Baltimore residents complain disproportionately affects urban cities.
FINRA is an American finance industry self-regulatory organization responsible for updates and regulations within the act of buying and selling stocks. In 2019, Stephen Callahan reached out to petition for the repeal or amendment of the pattern day trading rule, stating that it is “driving traders to more volatile markets.” Nothing has been resolved, officials said.
Historically, stock market trading has been a practice of the wealthy. The Economic Policy Institute statistics show that white middle-income households own an average of $86,000 in assets, while black family’s average income is closer to $11,000.
To get around the rule, some Baltimore residents have changed their online location to other countries.
Ashan Williams said that buying crypto currency is another way people could get around the rule, claiming that it is a “hack in the system” but many find the market too volatile. He also said if there was a way to petition for the removal of the rule he would since “it was a struggle and a fight to get around it, and not a lot of people in the city can have that same fight in them.”