Margin Rules Flashcards
Reg T sets out rules for handling _____ accounts
margin - note that it only applies to non-exempt securities
After initial Reg T requirements are met, _____ has ongoing margin requirements
FINRA
The firm’s loan to the customer is called the _____ balance
debit
Funds are borrowed from the bank by the brokerage firm at the _______ rate
broker loan rate - also called the call loan rate
Broker is limited to rehypothecating customer securities equal to _____ of debit balance
140%
Only _____ traded securities are marginable
actively
Non-marginable issues are:
- non-marketable securities
- OTC issues not included on the OTC margin list
- new issues for the first 30 days after issuance
Under Reg T, the 3 types of accounts where transactions can take place are:
- cash account
- margin account
- arbitrage account
Under Reg T, payment must be made no later than ____ days past ______
2 days past settlement (S+2)
If you can’t pay by S+2, or by extension date if given, then the position/account______
position is sold and the account is frozen for 90 days
when account is frozen, cannot buy unless _____ and cannot sell unless _____
cash is in hand or cannot sell unless securities are in hand
The Fed Reserve sets a margin requirement for arbitrage accounts. T/F
False. FINRA does
FINRA margin requirements for arbitrage accounts are:
- 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%
Reg T states that if a customer buys and sells securities on the same day, margin is calculated off the “______”
net purchase amount
If a margin requirement from FINRA is higher than Reg T, the customer must put up the ______ requirement
higher - FINRA
Maintenance calls must be met ______
promptly (3 days)
Min. margin for a new long account is ______
$2,000
If total price of the securities being purchased is less than the min margin requirement, then the margin call is for _____
the total price of the securities
Min. margin for a new short account is _____
$2,000
If total price of the securities being shorted is less than the min margin requirement, then the margin call is for _____
the full $2,000 minimum (since the loss on the short is potentially unlimited)
Min margin for day trading accounts is _____
$25,000
To discourage short sales of very cheap stocks, the min margin requirements are ______
very high
Min margin to short a stock under $5 is the greater of
100% of sale amount or $2.50 per share
Min margin to short a stock above $5 is greater of
30% of sale amount or $5 per share
