A customer opening a new margin account executes an initial transaction by selling short 1… — FINRA SIE (Securities Industry Essentials)

A customer opening a new margin account executes an initial transaction by selling short 100 shares of XYZ common stock at $35 per share when Federal Reserve Regulation T is 50%. What is the minimum required margin deposit the customer must make to satisfy regulatory requirements?

A
$1,750
$2,000Cevap
C
$3,500
D
$875

Cevap

The customer must deposit $2,000.

The correct answer is

2,000. Under Regulation T, a 50% margin requirement on a

3,500 transaction equals

1,750. However, FINRA rules specify that an investor establishing a new margin account must deposit a minimum of

2,000 in equity (or 100% of the trade value if less than

2,000). Since

1,750 is less than

2,000, the investor is obligated to deposit

2,000.

Adım Adım Çözüm

Calculate total proceeds/value of the short sale position.

100 shares ×

35 =

3,500 total market value.

Margin requirements are based on the total market value of the transaction.

Calculate the Federal Reserve Regulation T initial margin requirement.

3,500 × 50% =

1,750.

Regulation T mandates a 50% initial margin deposit on marginable equity securities.

Compare the Regulation T requirement to FINRA's minimum initial equity requirement.

FINRA requires a minimum deposit of

2,000 for initial margin transactions when the trade value exceeds

2,000.

Brokerage accounts must satisfy whichever requirement is greater between Regulation T and the FINRA $2,000 initial minimum equity rule.

Determine the final required customer deposit.

Because

1,750 is less than

2,000, the customer must deposit $2,000.

The stricter FINRA initial minimum requirement of $2,000 applies.

Anahtar Kavram

FINRA Initial Minimum Margin Requirement

Soru

Cevap

Adım Adım Çözüm

Anahtar Kavram

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