Regulation T

Regulation T is a rule set by the Federal Reserve that governs how much money investors can borrow from a brokerage firm to buy securities. Typically, it requires investors to provide at least 50% of the investment's cost upfront, known as initial margin, with the brokerage loaning the rest. The purpose is to ensure investors have sufficient skin in the game and to maintain stability in the financial markets. Regulation T also outlines the timeline and requirements for investors to meet margin calls if the value of their securities declines, helping to manage risk for both investors and brokerages.