Margin Requirements

The FINRA margin requirements sit alongside Reg T but cover a different slice of the margin landscape:

• Reg T (set by the Federal Reserve under its Exchange Act authority) governs initial margin on equity purchases
• FINRA margin requirements govern maintenance margin plus initial margin on instruments Reg T does not cover (corporate bonds, options, security futures, exempted securities)

Both apply simultaneously to a typical equity margin account: Reg T at the moment of purchase, FINRA margin every day thereafter.

The Layered Margin Framework

Two requirements govern margin transactions, and they overlap rather than conflict:

Think of it this way: Reg T is the rule at the moment of purchase. The customer wants to buy 1,000 shares of stock at $100; Reg T says they have to put up 50% ($50,000). FINRA margin takes over the moment the trade is settled. From day 2 onward, the customer's equity must stay above 25% of the position's market value or the firm issues a maintenance call. Two different sources, two different jobs.

Exam Tip: Gotchas

• Reg T is the FRB's INITIAL margin rule (50% of equity purchases); the FINRA margin requirements govern MAINTENANCE margin (25% long, 30% short). Both apply simultaneously: Reg T at the time of purchase, FINRA margin every day thereafter.

Maintenance Margin

Once a position is established, the customer's equity in the account must stay above the maintenance margin floor:

If the customer's equity falls below the maintenance margin floor, the firm issues a maintenance call. The customer must deposit cash or marginable securities to bring equity back to the floor. If the call is not met, the firm liquidates positions to satisfy the call.

How Concentrated Positions Get Higher Maintenance

A customer whose account has more than 50% concentrated in a single security can face higher than 25% maintenance margin. The exact threshold varies by firm, but the rule allows firms to apply higher house requirements to concentrated or lower-priced positions, which adds a buffer above the FINRA floor.

Real-world example: A customer holds 10,000 shares of one stock at $20 = $200,000 market value, with $50,000 of margin debt. Equity is $150,000. The 25% FINRA maintenance is $50,000, well below the $150,000 equity. But if the firm sets a 35% house requirement for concentrated positions, maintenance becomes $70,000, still well below the $150,000 equity, so no call yet. The position has cushion above the higher house floor.

Exam Tip: Gotchas

• Long-position maintenance is 25%; short-position maintenance is 30%. Common exam trap: students remember "25%" but apply it to short positions. Short positions take higher maintenance because losses are theoretically unbounded.
• Firms may apply higher HOUSE requirements above the FINRA floor. A firm cannot go below 25%, but it can go above. The 25% / 30% are floors, not ceilings.

Pattern Day Trader (PDT) Requirements

A Pattern Day Trader is a customer who:

• Executes 4 or more day trades within 5 business days, where
• Day trades constitute more than 6% of total trades in the margin account during that period

A "day trade" is a buy and sell (or short and cover) of the same security in the same trading day.

The $25,000 Minimum Equity

A PDT account must maintain minimum equity of $25,000 at the start of any trading day a day trade is executed.

The $25,000 minimum is a precondition, not a goal. The customer cannot day-trade out of a deficit.

Day-Trading Margin Calls

A day-trading margin call must be met within 5 business days. Failure to meet the call triggers a 90-day restriction:

• The account is restricted to a cash-available basis for 90 days (or until the call is met)
• Cash-available basis means the customer can only buy with settled cash already in the account
• The 90-day clock resets if the call is met before 90 days elapse

April 2026 Amendments: Transitioning to Intraday Margin

The SEC approved amendments to the FINRA margin requirements in April 2026 that:

• Replace the legacy day-trading provisions with an intraday-margin framework
• Align margin requirements with real-time intraday risk rather than start-of-day equity
• Begin transitioning the PDT regime out

Firms must implement systems that compute margin obligations based on the customer's intraday position and risk, not solely on the prior day's close. The transition is staged; the legacy PDT framework remains relevant for exam purposes during the transition.

Exam Tip: Gotchas

• A PDT account that drops below $25,000 equity is RESTRICTED from further day trading until the equity is restored. The customer cannot day-trade out of a deficit. The $25,000 minimum is a precondition, not a goal.
• The day-trading margin call gives the customer 5 BUSINESS days to meet it. Failure to meet triggers a 90-DAY cash-available restriction, not a permanent freeze. The exam may probe both numbers.
• The April 2026 intraday-margin amendments do NOT eliminate the 25% / 30% maintenance margin floors. They modify the day-trading layer specifically. Maintenance margin on overnight positions remains under the existing FINRA margin framework.

Portfolio Margin

The FINRA margin framework also authorizes a portfolio margin methodology for eligible customers:

• Available to eligible customers (typically equity ≥ $100,000)
• Margin requirement = theoretical loss of the portfolio under stressed scenarios
• Risk-based; not a flat percentage of market value

Portfolio margin is preferred by sophisticated customers running diversified or hedged strategies. A portfolio with offsetting long and short positions may have a much smaller theoretical loss than its gross market value, so portfolio margin can produce a lower margin requirement than strategy-by-strategy Reg T calculations.

Think of it this way: Reg T treats every position in isolation: $100 of stock requires $50 of equity, regardless of whether the customer is also short a related security. Portfolio margin treats the entire account as one risk unit: a long equity position partially hedged by an index put might require less margin than the long position alone, because the put offsets some downside risk under stress scenarios.

Exam Tip: Gotchas

• Portfolio margin is available to ELIGIBLE customers, typically with at least $100,000 equity. It is not the default; it is an alternative methodology the customer must affirmatively elect, with the firm's approval based on suitability and account size.
• Portfolio margin uses theoretical-loss stress scenarios, not flat percentages. A hedged portfolio may have a small theoretical loss and therefore a small margin requirement. The exam may probe whether portfolio margin is "lower" or "higher" than Reg T; the answer depends on the portfolio.