It's actually an SEC rule. They in their infinite wisdom decided that the little guy needed protecting, yah right, so unless you maintain a $25,000 account balance you are not allowed to "Daytrade". It's called pattern day trading actually. Here's a link that explains it pretty well.
There is another site that went into more details about cash accounts and I will search for it, I only have cash accounts after I seen it.
Does this rule change apply to cash accounts?
Day trading in a cash account is generally prohibited. Day trades can occur in a cash account only to the extent the trades do not violate the free-riding prohibition of Federal Reserve Board's Regulation T. In general, failing to pay for a security before you sell the security in a cash account violates the free-riding prohibition. If you free-ride, your broker is required to place a 90-day freeze on the account.
Does this rule apply only if I use leverage?
No, the rule applies to all day trades, whether you use leverage (margin) or not. For example, many options contacts require that you pay for the option in full, that is at 100%. As such, there is no leverage used to purchase the options. Nonetheless, if you engage in numerous options transactions during the day you are still subject to intra-day risk. You may not be able to realize the profit on the transaction that you had hoped for and may indeed incur substantial loss due to a pattern of day-trading options. Again, the day trading margin rule is designed to require that funds be in the account where the trading and risk is occurring.
Can I withdraw funds that I use to meet the minimum equity requirement or day trading margin call immediately after they are deposited?
No, any funds used to meet the day-trading minimum equity requirement or to meet any day-trading margin calls must remain in your account for two business days following the close of business on any day when the deposit is required.
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