Regulation T (12 CFR 220), “Credit
by Brokers and Dealers,” became effective October 1, 1934, to fulfill
the statutory mandate of sections 7 and 8(a) of the Securities Exchange
Act of 1934 that the Federal Reserve (1) limit the amount of credit
that brokers, dealers, and members of national securities exchanges
(collectively called “creditors”) could extend to customers and (2)
restrict the source of the creditors’ borrowings. This latter restriction
was removed when Congress repealed section 8(a) of the act in 1996.
In addition to requiring a specific amount of margin to
be deposited, Regulation T governs when the deposits must be made
and what action the broker must take if the deposit is not made within
the required time. The regulation also contains rules regarding the
substitution and withdrawal of collateral.
The regulation divides transactions into those that should
be put into the margin account and those that may be put into special
accounts. All transactions are to be put into the margin account unless
there is a specific provision permitting the use of a special account.
These special-account provisions cover cash transactions, arbitrage,
non-equity securities, non-securities credit and employee stock ownership
transactions, and relations between brokers, among other matters.
Borrowing by brokers is also covered, to implement 1996 amendments
to the act that exempted certain broker-dealers from the Board’s margin
authority.
Margin Requirements
1 for Credit Extended Under Regulation
T
Margin Requirements
for Credit Extended Under Regulation T
| Percent of Market Value |
|
|
| Effective date |
Margin stocks |
Convertible bonds |
Short sales |
| 1934—Oct. 1 |
25-45 |
— |
(2) |
| 1936—Feb. 1 |
25-55 |
— |
(2) |
| Apr. 1 |
55 |
— |
(2) |
| 1937—Nov. 1 |
40 |
— |
50 |
| 1945—Feb. 5 |
50 |
— |
50 |
| July 5 |
75 |
— |
75 |
| 1946—Jan. 21 |
100 |
— |
100 |
| 1947—Feb. 1 |
75 |
— |
75 |
| 1949—Mar. 3 |
50 |
— |
50 |
| 1951—Jan. 17 |
75 |
— |
75 |
| 1953—Feb. 20 |
50 |
— |
50 |
| 1955—Jan. 4 |
60 |
— |
60 |
| Apr. 23 |
70 |
— |
70 |
| 1958—Jan. 16 |
50 |
— |
50 |
| Aug. 5 |
70 |
— |
70 |
| Oct. 16 |
90 |
— |
90 |
| 1960—July 28 |
70 |
— |
70 |
| 1962—July 10 |
50 |
— |
50 |
| 1963—Nov. 6 |
70 |
— |
70 |
| 1968—Mar. 11 |
70 |
50 |
70 |
| June 8 |
80 |
60 |
80 |
| 1970—May 6 |
65 |
50 |
65 |
| 1971—Dec. 6 |
55 |
50 |
55 |
| 1972—Nov. 24 |
65 |
50 |
65 |
| 1974—Jan.
3 |
50 |
50 |
50 |
1 Margin requirements
are the difference between the market value (100 percent) and the
maximum loan value of collateral as prescribed by the Board.
2 The requirement was
the margin “customarily required” by the brokers and dealers.
