Margin Rules Flashcards
Debit Balance
Loan to the customer that allows them to buy securities in a margin account
Regulation U
States that brokerage firms may not borrow more money from banks using securities as collateral than they lend to customers
How much are banks allowed to lend to brokerage firms if the firms use securities as collateral?
70%
What percentage of a customers securities is a bank allowed to rehypothecate?
140%
What does Regulation T do?
regulates credit from broker to customer. Overseen by Federal Reserve Board
What securities does Regulation T cover?
Non-exempt securities that are actively traded:
Securities listed on a stock exchange
High volume OTC issues
For a new issue, how long must it be on the market before it is eligible for margin trading?
30 days
What are the initial margins set by Reg T for stocks?
Long: 50%
Short: 50%
What are the initial (and maintenance) margins set by Reg T for options (non-LEAP)?
100% of Premium
What are the initial (and maintenance) margins set by Reg T for LEAP options?
75%, except when within 9 months of expiration, then 100%
What happens if a customer sells a security but fails to deliver it?
Position must be bought back in 10 business days after S
What is the minimum margin to open a long account?
$2000
When would a customer not be required to use the $2000 minimum margin?
If the total amount they purchased was below $2000. In that case the highest margin that can be required is the total purchase amount
What is the minimum margin to open a short account?
$2000
Can a customer ever open a short margin account for less than $2000?
No
Minimum margin for a day trading account
$25000
What is the minimum margin to short a stock under $5 a share?
100% of sale amount or $2.50 per share, whichever is greater
What is the minimum margin to short a stock $5 or more?
$5 per share or 30% of sale amount, whichever is greater
What is the minimum maintenance margin for long positions?
25%
What is the minimum maintenance margin for short positions?
30%
What is the minimum maintenance margin for corporate bonds?
Greater of 20% of MV or 7% of face
What is the minimum maintenance margin for municipal bonds?
Greater of 15% of MV or 7% of face
What is the minimum margin for an arbitrage account?
5%
What is the minimum margin for a day trading account?
25%
how is the minimum margin for Leveraged ETFs computed?
multiply the normal minimum by the ETFs multiplier
What is DVP?
Delivery Versus Payment - delivery made with understanding that customer will pay when securities are recieved
How many days does a customer have to pay under Regulation T?
S + 2 = 5
What is a call loan?
Loan from bank to broker using customer margin securities as collateral
Who grants Regulation T extension requests?
FINRA
