WASHINGTON -- With the risky practice of day trading gaining popularity among Main Street investors, regulators have been dismayed by stories of people putting up their student loan money, mortgages or retirement savings to finance it.
Now the brokers' group that operates the Nasdaq Stock Market is considering a proposal requiring electronic day-trading firms to screen investors and warn them in writing of the risks.The National Association of Securities Dealers' board of governors voted at a meeting in New York City on Thursday to seek comment on the proposal from its member brokerage firms and the public. The NASD announced the move in Washington.
Frank Zarb, NASD's chairman and chief executive officer, said in a statement that the action "affirms our continuing efforts to ensure that investors are better protected and better informed about the risks involved before engaging in high-risk investment activities like day trading."
"It is an important step toward making individuals aware of the potential risks involved in day trading," Zarb said.
Day-trading firms sell training courses and special software programs to ordinary investors who want to try the lightning-speed practice of day trading, exploiting small price movements in stocks to make a profit.