Welcome to Margin and Securities Lending, where customer borrowing, collateral, short-sale delivery, and day-trading limits meet the firm's operational responsibilities.
Exam Weight: 3 of 35 in Function 1 (6% of exam)
What You'll Learn
In this unit, you'll cover:
- Margin accounts and margin requirements: How borrowing is secured, and how initial and maintenance requirements differ.
- Accounts permitted to trade on margin: Why an approved margin account and a customer agreement are required before credit is extended.
- Margin documentation, disclosures, and calls: What customers receive, what a deficiency means, and when a firm can liquidate.
- Stock lending and short sales: How borrowed securities support delivery and how short sales are marked and located.
- Day trading and buying power: The pattern day trader standard, minimum equity, buying power, and call restrictions.
Why This Matters
Margin adds credit risk to a securities transaction. A customer can lose value, fall below a required equity level, and face a call or liquidation.
Operations professionals need to recognize the account authorization, collateral, delivery, and buying-power controls that keep those risks within required limits.
Let's start with margin account mechanics and the difference between the amount needed to buy and the equity that must remain.