Federal Reserve Board The Board of Governors of the Federal Reserve System, commonly known as the Federal Reserve Board, is the main governing body of the Federal Reserve System. It is charged with overseeing the Federal Reserve Banks and with helping implement the mon ...

Regulation T (also referred to as Reg T) is 12 CFR §220 – Code of Federal Regulations, Title 12, Chapter II, Subchapter A, Part 220 (Credit by Brokers and Dealers).Federal Reserve Website
/ref> Regulation T governs the extension of credit by securities brokers and dealers in the United States. Its best-known function is the control of

margin Margin may refer to: Physical or graphical edges *Margin (typography), the white space that surrounds the content of a page *Continental margin, the zone of the ocean floor that separates the thin oceanic crust from thick continental crust *Leaf ...

requirements for stocks bought on margin. The initial margin requirement for such margin stock purchases has been 50% since 1974, but Regulation T gives the Federal Reserve the authority to change this percentage. Raising the margin requirement ostensibly reduces risk in the financial system by reducing the potential leverage and total buying power of investors. Conversely, lowering the margin requirement increases

systemic risk In finance, systemic risk is the risk of collapse of an entire financial system or entire market, as opposed to the risk associated with any one individual entity, group or component of a system, that can be contained therein without harming the ...

by expanding the buying power and leverage available to investors. Since 1974, the Federal Reserve has not deemed it necessary to adjust the margin requirement despite periodic extremes of price volatility in the equities markets.{{Cite web , title=Margin Requirements as a Policy Tool? , url=https://www.frbsf.org/economic-research/publications/economic-letter/2000/march/margin-requirements-as-a-policy-tool/ , access-date=2022-03-31 , website=Federal Reserve Bank of San Francisco , language=en

External links

Text of Regulation T

References

Federal Reserve System Margin policy