No Trading Today.

Sen. Susan Collins (RMaine) is no fan of the day-trading industry. As chair of the Permanent Subcommittee on Investigations, she recently concluded an eight-month probe of day-trading firms and practices. Her report (available at www.senate.gov/[sim]gov_affairs/022400_report.htm) argues that we need more regulations and oversight to curb abuses.

Targeting "serious" traders, who average 29 trades per day, and the relatively small but growing number of day-trading companies that provide customers with high-speed terminals and real-time quotes (currently an estimated 60 firms nationally), Collins calls day trading "little more than a game of chance." Amazed by the boldness of industry claims and ad pitches, such as Lazy Day Trader's pledge that "You don't have to be able to understand Economics, the Stock Market or International Finance," Collins wants the industry to provide unambiguous warnings of risk--announcing that one's chances of making money with a capitalization of less than $50,000 are slim.

She also wants the Securities and Exchange Commission to require firms to instruct potential traders that they must earn substantial money simply to pay their trading commissions (an average of $16 per trade), and ban them from helping customers secure loans to pay for margin calls. Even if Collins is right, and the majority of serious day traders are losing money, it doesn't follow that the state has an interest in protecting the traders from themselves.

By insulating adults from the consequences of their behavior and their risk calculations, traders are denied a valuable education. There are many things hapless day traders can learn if not shielded from their ill-advised financial decisions, not least of which are the complexities of economics, the stock market, and international finance. But don't worry, casual traders, Collins isn't targeting the vastly more numerous online traders at E-Trade, Datek, or Ameri-trade--yet.