margin outline

Federal Reserve Board (FRB) a.k.a The FED

·        Creates margin rules

·        Margin: customer borrows $ or stock

·        Regulation T, a.k. Reg T: Fed rule about broker/dealers giving credit/stock for customer purchases

·        Decided which stocks can be bought on margin

·        Listed stocks can be bought on margin

·        NASDAQ NMS stocks can be bought on margin

·        Some unlisted over the counter OTC stocks can be traded on margin

·        DO NOT NEED TO KNOW MARGIN REQUIREMENTS

·        Reg T, broker/dealers give credit to customers to buy stock

·        Reg U, banks give $ to customers to buy stock, to members of b/d firm who buy for account of firm

Reg T

·        When customers pay for purchase

·        Amount customer must pay for purchase

·        50% down for stock and bonds

·        b/d must follow regulations

·        b/d make sure payments made

margin agreement

·        a.k.a customer agreement

·        fill out before client can buy/sell

·        has lending authorization and hypothecation agreement

settlement date/trade date

·        NOT TESTED