Margin Rules

Question 1

Debit Balance

Answer 1

Loan to the customer that allows them to buy securities in a margin account

Question 2

Regulation U

Answer 2

States that brokerage firms may not borrow more money from banks using securities as collateral than they lend to customers

Question 3

How much are banks allowed to lend to brokerage firms if the firms use securities as collateral?

Answer 3

70%

Question 4

What percentage of a customers securities is a bank allowed to rehypothecate?

Answer 4

140%

Question 5

What does Regulation T do?

Answer 5

regulates credit from broker to customer. Overseen by Federal Reserve Board

Question 6

What securities does Regulation T cover?

Answer 6

Non-exempt securities that are actively traded:
Securities listed on a stock exchange
High volume OTC issues

Question 7

For a new issue, how long must it be on the market before it is eligible for margin trading?

Answer 7

30 days

Question 8

What are the initial margins set by Reg T for stocks?

Answer 8

Long: 50%
Short: 50%

Question 9

What are the initial (and maintenance) margins set by Reg T for options (non-LEAP)?

Answer 9

100% of Premium

Question 10

What are the initial (and maintenance) margins set by Reg T for LEAP options?

Answer 10

75%, except when within 9 months of expiration, then 100%

Question 11

What happens if a customer sells a security but fails to deliver it?

Answer 11

Position must be bought back in 10 business days after S

Question 12

What is the minimum margin to open a long account?

Answer 12

$2000

Question 13

When would a customer not be required to use the $2000 minimum margin?

Answer 13

If the total amount they purchased was below $2000. In that case the highest margin that can be required is the total purchase amount

Question 14

What is the minimum margin to open a short account?

Answer 14

$2000

Question 15

Can a customer ever open a short margin account for less than $2000?

Answer 15

No

Question 16

Minimum margin for a day trading account

Answer 16

$25000

Question 17

What is the minimum margin to short a stock under $5 a share?

Answer 17

100% of sale amount or $2.50 per share, whichever is greater

Question 18

What is the minimum margin to short a stock $5 or more?

Answer 18

$5 per share or 30% of sale amount, whichever is greater

Question 19

What is the minimum maintenance margin for long positions?

Answer 19

25%

Question 20

What is the minimum maintenance margin for short positions?

Answer 20

30%

Question 21

What is the minimum maintenance margin for corporate bonds?

Answer 21

Greater of 20% of MV or 7% of face

Question 22

What is the minimum maintenance margin for municipal bonds?

Answer 22

Greater of 15% of MV or 7% of face

Question 23

What is the minimum margin for an arbitrage account?

Answer 23

5%

Question 24

What is the minimum margin for a day trading account?

Answer 24

25%

Question 25

how is the minimum margin for Leveraged ETFs computed?

Answer 25

multiply the normal minimum by the ETFs multiplier

Question 26

What is DVP?

Answer 26

Delivery Versus Payment - delivery made with understanding that customer will pay when securities are recieved

Question 27

How many days does a customer have to pay under Regulation T?

Answer 27

S + 2 = 5

Question 28

What is a call loan?

Answer 28

Loan from bank to broker using customer margin securities as collateral

Question 29

Who grants Regulation T extension requests?

Answer 29

FINRA