margin requirement
Barron's Finance & Investment Dictionary:
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margin requirement
minimum amount that a client must deposit in the form of cash or eligible securities in a margin account as spelled out in regulation t of the Federal Reserve Board. Reg T requires a minimum of $2,000 or 50% of the purchase price of eligible securities bought on margin or 50% of the proceeds of short sales.
Also called initial margin.
See also margin; margin security; minimum maintenance; selling short.
Also called initial margin.
See also margin; margin security; minimum maintenance; selling short.
| Margin Department, Margin Call | |
| Margin Security, Margin of Profit |
margin requirement, that part of a security's price that a buyer must pay for in cash. The balance of the price is met by the broker, who, in effect, is supplying a client with a loan. The smaller the margin, the greater the inducement to speculation. Low margin requirements were considered an important cause of the 1929 collapse of the American stock market. In 1934, the Securities Exchange Act gave the Federal Reserve Board the power to regulate margin requirements. The amount has been reset at various times, but in recent years, the Federal Reserve has instituted a 50% margin requirement with a $2,000 minimum.
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Barron's Finance & Investment Dictionary
Dictionary of Finance and Investment Terms. Copyright © 2010 by Barron's Educational Series, Inc. All rights reserved.
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Mentioned in
Regulation T
(finance term)
Fictitious Credit
(finance term)
Special Miscellaneous Account (SMA)
(finance term)
Initial Margin
(finance term)
Special Arbitrage Account
(finance term)
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