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FinRA`s General Counsel Office (OGC) staff provide interpretive advice on Finra rules to broker-dealers, lawyers, registered agents, investors and other interested parties. For more information, see Interpreting the rules. Under the Federal Reserve Board`s T regulation, you can borrow up to 50% of the purchase price of equity securities that can be purchased on margin. This is called the „initial margin”. Some companies require you to deposit more than 50% of the purchase price. Let`s say you buy a stock for $50 and the share price goes up to $75. If you bought the stock in a cash account and paid in full, you`ll get a 50% return on investment (your $25 profit is 50% of your initial $50 investment). But if you bought the stock on margin – pay $25 in cash and borrow $25 from your broker – you`ll get a 100% return on the money you invest (your $25 profit is 100% of your initial $25 investment). You can also owe interest to your broker on the $25 you borrow. An exception to the 30% maintenance margin requirement is when the investor`s account is concentrated. A concentrated account is formed when a single position represents 60% of the total allowable market value or more. Due to the higher risk of fluctuation, the maintenance margin requirement remains at 50% if the account is concentrated.

For example: exchanges and self-regulatory organizations like FINRA have their own margin trading rules, and brokers can set their own margin requirements as long as they are at least as restrictive as Reg T, according to the U.S. Securities and Exchange Commission (SEC). FINRA requires a minimum deposit with a brokerage of $2,000 or 100% of the purchase price, whichever is lower. This is called the „minimum margin.” Similar to mortgages and other traditional loans, margin trading usually requires an application and collateral deposit with your broker, and you have to pay margin interest on the borrowed money. Margin interest rates vary from broker to broker. In many cases, your account securities can serve as collateral for margin loans. (A TD Ameritrade account admitted to margin trading must have at least $2,000 in cash or eligible securities and at least 30% of its total value as equity at all times.) According to these rules, the client`s equity in the account cannot be less than 25% of the current market value of the securities in the account. Otherwise, the client may be asked to deposit more funds or securities to maintain equity at the 25% level (called margin call). Otherwise, the Company may liquidate the securities of the Client`s account in order to reduce the Equity of the Account to the required level. Let`s say you want to buy 1,000 shares of a stock that is currently trading at $50 per share. If you bought it with only the money in your account, you`ll need $50,000. But if you bought the shares through a margin account, you`d only need $25,000 in your account to buy them – the remaining $25,000 would be guaranteed by the margin.

For example, if your account remains .m undervalued from Monday before 3:45 p.m., .m., the automatic margin close will take place .m Wednesday at 3:45 p.m., .m., unless a margin close occurs earlier because the margin closing value falls to half or less than half of the margin used. Saturday and Sunday do not count for the 2 consecutive days as trading is not available on weekends (see OANDA opening hours). If the account recovers before the end of 2 consecutive trading days by meeting the margin requirements in the daily margin check at 3:45 p.m ET, a new count will begin from the day the account falls below the margin requirements. For example, if your account expires on Monday at 3:45 p.m.m. is undervalued, recovers and is soft enough on Tuesday at 15:45 .m .m then .m falls below margin requirements again on Wednesday before 15:45.m. and remains continuously undervalued, a margin close takes place 2 days later on Friday from 15:45.m. .m. Use lower leverage so you can impose a higher margin requirement on yourself. This way, you won`t be tempted to take positions beyond your comfortable leverage level. You`ll also be aware of a potential margin close sooner and will be able to increase leverage as a last resort to avoid it. The SEC`s Office of Investor Education and Advocacy is issuing this Investor Bulletin to educate investors on the use of margin accounts to purchase securities, including the risks involved. The OANDA fxTrade platform supports margin trading, which means you can take positions above your account balance.

One of the advantages of margin trading is that you can use the money in your account and potentially make significant profits compared to the amount invested. The downside is that you have an equal chance of incurring significant losses on your account. It is a good practice to use stop-loss orders to limit potential losses when using leverage. Stop Loss and Take Profit orders are not guaranteed; Spreads in market prices can result in the execution of your stop-loss orders at a less favorable price or your take-profit orders at a price below the level you specify. When an investor holds margin-purchased securities, Firstrade`s minimum margin requirement for most shares is lowered to 30% to account for price fluctuations. This is called the maintenance margin requirement. If the investor is unable to hold the equity above the minimum margin requirement, a margin call will be made. With futures, similar to stocks, you must first reserve the initial margin to open a futures position. If the margin capital falls below a certain amount, it must be increased. This is called the „maintenance margin”. The Federal Reserve Board, self-regulatory organizations (SROs) such as FINRA and stock exchanges have rules that govern margin trading.

Brokerage firms can set their own „home” requirements, which are more restrictive than these rules. Here are some of the most important rules you should be aware of: For example, before trading on margin, FINRA requires you to deposit at least $2,000 or 100% of the purchase price of the securities with your brokerage firm, whichever is lower. This is called the „minimum margin.” Some companies may ask you to deposit more than $2,000. Here are some basic questions and answers about margin trading. To open a margin account, your broker will have you sign a margin agreement. The margin agreement may be part of your general brokerage account opening agreement or a separate agreement. The margin agreement states that you must comply with the margin requirements set by the Federal Reserve Board, FINRA, an applicable stock exchange, and the company in which you created your margin account. Be sure to carefully review the agreement before signing it. Another potential benefit of using margins is the ability to diversify beyond traditional stocks.

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