The current initial margin requirement set by the Federal Reserve Board’s Regulation T is 50%. However, this regulation is only a minimum requirement; some equity brokerage firms may set their initial margin requirement higher. Initial margin is the percent of a purchase price that must be paid with cash when using a margin account.
What are the rules for margin requirements?
The Federal Reserve's Regulation T sets the rules for margin requirements. There is an initial margin requirement, which represents the margin at the time of the purchase. There is also a maintenance margin requirement, which represents the minimum amount of equity needed in the margin account to keep the position open.
How does initial margin work?
To open a margin account at a brokerage firm, an account holder first needs to post a certain amount of cash, securities or other collateral, known as the initial margin requirement.
