I spent 2 years at a day trading shop with 50-75 clients or so. None of them ever made any money, so I got a chance to observe how traders lose money. Contrary to popular belief, they DON'T lose all their money day trading. We never had a single client wiped out by day trading. Everyone who lost all their money did so by holding on to margined losing positions. Usually they would day trade for a few weeks, lose a couple grand, then decide to be a "swing trader" and ride a losing position into the ground. Despite having it explained to them repeatedly, no one really seemed to understand how they lost all their money without the stock going to zero.

So, IMO, it seems that losing money at a day trading firm has been confused with losing money day trading. If Levitt (who once, before Congress, actually said that day traders should use on-line brokers like E-Trade because the commissions are lower) really wanted to "protect the little guy" then he should have just denied margin to small accounts and left day trading alone. Of all our clients who lost all their money, the new regulations would not have helped anyone.