Today, the Permanent Subcommittee on Investigations continues its examination of day trading. Last fall, the Subcommittee began its investigation with an overview hearing. After several months of investigation, we now will draw back the curtain and provide an in-depth look at the practices of three day trading firms representative of the industry. Day trading involves taking positions in stocks for very short periods of time, usually minutes or hours, but rarely longer than a day.
Day traders seek small increments of profit from momentary fluctuations in the price of a stock.
Over the course of eight months, the Subcommittee has investigated 15 firms, which reported a total of about 12,700 day trading accounts. While a day trader could open more than one account, the Subcommittee s review indicates that the number of day traders is significantly higher than most of the earlier estimates. At our hearing last fall, we heard testimony that there were about 5,000 day traders at approximately 60 firms. Commission income, which is normally generated on a per trade basis, is the primary source of revenue for most day trading firms. In the aggregate, those firms estimated that the average customer executes about 29 trades each day.