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Series 7 > Margin Rules > Flashcards

Margin Rules Flashcards

1
Q

Reg T sets out rules for handling _____ accounts

A

margin - note that it only applies to non-exempt securities

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2
Q

After initial Reg T requirements are met, _____ has ongoing margin requirements

A

FINRA

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3
Q

The firm’s loan to the customer is called the _____ balance

A

debit

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4
Q

Funds are borrowed from the bank by the brokerage firm at the _______ rate

A

broker loan rate - also called the call loan rate

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5
Q

Broker is limited to rehypothecating customer securities equal to _____ of debit balance

A

140%

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6
Q

Only _____ traded securities are marginable

A

actively

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7
Q

Non-marginable issues are:

A
  • non-marketable securities
  • OTC issues not included on the OTC margin list
  • new issues for the first 30 days after issuance
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8
Q

Under Reg T, the 3 types of accounts where transactions can take place are:

A
  • cash account
  • margin account
  • arbitrage account
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9
Q

Under Reg T, payment must be made no later than ____ days past ______

A

2 days past settlement (S+2)

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10
Q

If you can’t pay by S+2, or by extension date if given, then the position/account______

A

position is sold and the account is frozen for 90 days

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11
Q

when account is frozen, cannot buy unless _____ and cannot sell unless _____

A

cash is in hand or cannot sell unless securities are in hand

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12
Q

The Fed Reserve sets a margin requirement for arbitrage accounts. T/F

A

False. FINRA does

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13
Q

FINRA margin requirements for arbitrage accounts are:

A
  • 50% for stocks and bonds
  • 100% of premium for options (except LEAPs)
  • 75% of premium (for LEAPs) - if within 9 months of expiration, then 100%
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14
Q

Reg T states that if a customer buys and sells securities on the same day, margin is calculated off the “______”

A

net purchase amount

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15
Q

If a margin requirement from FINRA is higher than Reg T, the customer must put up the ______ requirement

A

higher - FINRA

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16
Q

Maintenance calls must be met ______

A

promptly (3 days)

17
Q

Min. margin for a new long account is ______

A

$2,000

18
Q

If total price of the securities being purchased is less than the min margin requirement, then the margin call is for _____

A

the total price of the securities

19
Q

Min. margin for a new short account is _____

A

$2,000

20
Q

If total price of the securities being shorted is less than the min margin requirement, then the margin call is for _____

A

the full $2,000 minimum (since the loss on the short is potentially unlimited)

21
Q

Min margin for day trading accounts is _____

A

$25,000

22
Q

To discourage short sales of very cheap stocks, the min margin requirements are ______

A

very high

23
Q

Min margin to short a stock under $5 is the greater of

A

100% of sale amount or $2.50 per share

24
Q

Min margin to short a stock above $5 is greater of

A

30% of sale amount or $5 per share

25
Q

FINRA min maintenance margin requirements

A
  • 25% long stocks and convertibles, 30% short
  • corp debt greater of 20% of MV or 7% of face (short and long)
  • muni greater of 15% of MV or 7% of face (short and long)
  • all options (except LEAPs) 100% of premium (long)
  • LEAPs 75% premium, 100% if in 9 months to expiration (long)
26
Q

Critical margin requirements for Series 7 are:

A
  • Reg T: 50% long stock and 50% short stock

- Min maintenance: 25% long stock and 30% short stock

27
Q

For arbitrage accounts, FINRA sets min margin at ____ of long market value

A

5% - there is no Reg T requirement

28
Q

Min margin for day trading accounts is greater of _____ or ______

A

$25,000, or 25% of the intra-day high market value

29
Q

A day trade is defined as

A

the purchase and sale of the same security on the same day

30
Q

A DVP is

A

delivery versus payment (same as COD, cash on delivery) - this is when the delivery is made with the understanding that the customer will pay when the securities are received

31
Q

Regulation T regulates credit from ___ to ____; Reg U regulates credit from ___ to ____

A

Reg T = broker to customer

Reg U = bank to broker

32
Q

Can listed options be bought on margin?

A

NO, the cannot. LEAPs can.

33
Q

Can mutual fund shares be bought on margin?

A

NO, they cannot. Must be paid in full.

34
Q

Min margin requirements are calculated off the transaction value or the closing price that day?

A

The closing price that day

35
Q

Reg T does not cover DVP transactions. T/F

A

True.

Series 7 (34 decks)

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