Series 7 Margin

Series 7 Margin

NYSE minimum maintenance for a LONG margin account

Customer must maintain 25% of the current market value of securities in the form of equity in the account.

What can be used to meet the initial margin requirement in a margin account long?

1. A deposit of cash equal to the Reg T amount, OR 2. A deposit of securities which have a market value that is 2 X the Reg T requirement

Reg T Initial Requirements for a Margin Account Long

Customer must deposit 50% of the purchase price or $2000, whichever is greater. An exception to this rule is if the purchase price in the account is less than $2,000, then the customer must deposit the full amount of the purchase.

NYSE minimum maintenance for a SHORT margin account

            Customer must maintain 30% of the current market value of securities in the form of equity in the short margin account.

Regulation T settlement

Trade date plus five business days (T + 5).

Regulation T margin deposit

Generally 50% of the purchase price. This means that the customer deposits 50% of the purchased amount and can borrow the remaining 50% from the broker/dealer (loan value).

Special Memorandum Account (SMA)

A line of credit available to the client based on prior buying power within the margin account.

Reg T Initial Requirements for a Margin Account Short

1. Minimum equity to open a short account is $2,000, no exceptions
2. Stock price of: a. $0 up to $5: Deposit of $2.50 per share or 100% of the market value, whichever is greater; b. $5 up to $17: Deposit of $5.00 per share; c. $17 and over: Regulation T (50%)

Margin Account

Account where the customer can use borrowing power to purchase additional securities (Reg T 50% deposit, 50% borrowing), called leverage and will magnify gains and losses to account. Clients must have a margin account to sell stock short.