Regulation T (Reg T) is a Federal Reserve rule under the Securities Exchange Act of 1934 that governs the extension of credit by broker-dealers to customers for purchasing securities.
Initial margin requirement: Currently 50% — customers must deposit at least 50% of the purchase price of marginable securities.
Example: Buying $20,000 of stock requires at least $10,000 in equity (50% × $20,000). The broker can lend the remaining $10,000.
Payment period: Reg T requires payment within two business days of the settlement date (T+2 settlement → payment due T+4).
Good faith violations: In cash accounts, violations occur when customers buy and sell before paying for the purchase. Results in a 90-day restriction (must pay in full before trading).
Reg T vs. other margin rules:
| Rule | Set by | Governs | |---|---|---| | Reg T | Federal Reserve | Initial margin (50%) | | FINRA Rule 4210 | FINRA | Maintenance margin (25% for long, 30% for short) | | Firm "house" rules | Broker-dealer | Often stricter than Reg T/FINRA |
Portfolio margin: FINRA-approved alternative for eligible customers (options strategies); can result in lower margin requirements based on net portfolio risk.
> Exam tip: Reg T = 50% initial margin, set by the Federal Reserve. FINRA maintenance margin = 25% long, 30% short (minimum; firms can be stricter). Margin calls are heavily tested on the Series 7.