Table of Contents
Regulation T, often shortened to “Reg T,” refers to Federal Reserve Board rules that dictate how much credit broker-dealers might extend to investors via margin accounts. Reg T also governs certain cash transactions. Trading on margin is a high-risk strategy that involves qualified investors borrowing funds from their brokerage, usually in an effort to place bigger trades.
In margin trading, Regulation T allows investors to borrow up to 50% of a trade, with cash or equity covering the other 50% (a.k.a., initial margin). An investor who fails to meet the initial margin requirements may be subject to a Reg T call, which is one type of margin call. Understanding Regulation T, and Regulation T calls, is important when trading securities on margin.
Key Points
• Regulation T (Reg T) is a Federal Reserve Board rule that limits the credit brokerages might extend to investors for margin trading; it also covers certain cash transactions.
• Margin trading enables investors to borrow money from their brokerage to take bigger positions, using their account assets as collateral.
• Reg T establishes the initial margin requirement, limiting the amount an investor could borrow to a maximum of 50% of the security’s purchase price.
• The regulation functions as a risk management tool to limit potential losses for investors and ensure they contribute some of their own capital to the trade.
• A Reg T call is issued when an investor fails to meet the 50% initial margin requirement, restricting further trades until the deposit is made or securities are sold off by the brokerage.
Understanding Regulation the T Framework
Regulation T is issued by the Federal Reserve Board, pursuant to the 1934 Securities Exchange Act. The purpose of Reg T is to regulate how brokerage firms and broker dealers extend credit to investors in margin trading transactions. Specifically, regulation T governs initial margin requirements, as well as payment rules that apply to certain types of securities transactions.
Increase your buying power with a margin loan from SoFi.
Borrow against your current investments at 5.00% to 9.75% based on loan size* and start margin trading.
*For full margin details, see terms.
How Reg T Works
Regulation T’s main function is to limit the amount of credit a brokerage might extend. It’s also used to regulate prohibited activity in cash accounts, which are separate from margin accounts.
For example, an investor cannot use a cash account to buy a stock then sell it before the trade settles under Reg T rules, a violation known as freeriding. It may be beneficial to review the basics of leveraged trading to deepen your understanding, too.
Regulation T works by establishing certain requirements for trading on margin. Specifically, there are three thresholds investors are required to observe when margin buying, one of which, called initial margin, is directly determined by Regulation T.
Minimum Margin Requirement
One of the thresholds required for margin trading is minimum margin, which represents the amount an investor must deposit with their brokerage before opening a margin account. Under FINRA rules, this amount must be $2,000 or 100% of the purchase price of the margin securities, whichever is less. Keep in mind that this is FINRA’s rule, and that some brokerages may require a higher minimum margin.
Maintenance Margin Requirements
Another threshold, maintenance margin, represents the minimum amount of margin equity that must be held in the account at all times. If you don’t know what margin equity is, it’s the value of the securities held in your margin account less the amount you owe to the brokerage firm.
FINRA sets the minimum maintenance margin at 25% of the total market value of margin securities though brokerages could establish higher limits.
Initial Margin Requirements
The third margin threshold, called initial margin, is covered by Reg T and represents the amount an investor is allowed to borrow. Regulation T sets the maximum at 50% of the purchase price of margin securities. Again, brokerage firms may require investors to make a larger initial margin deposit, which may vary depending on the type of asset or level of risk involved.
Recommended: What Is Leveraged Trading?
Why Regulation T Exists
Margin trading could be risky, and Regulation T is intended to limit an investor’s potential losses. If an investor were able to borrow an unlimited amount of credit from their brokerage account to trade, they could potentially realize much larger losses over time if their investments fail to pay off.
Regulation T is also designed so that investors have some skin in the game, so to speak, by requiring them to use some of their own money to invest. This could be seen as an indirect means of risk management, since an investor who’s using at least some of their own money to trade on margin may be more likely to calculate risk/reward potential and avoid reckless decision-making.
Example of Regulation T in Practice
Regulation T establishes a 50% baseline for the amount an investor is required to deposit with a brokerage before trading on margin. For example, say you want to open a margin account. You make the minimum margin deposit of $2,000, as required by FINRA.
Next, you want to purchase 100 shares of stock valued at $100 each, which result in a total purchase price of $10,000.
Under Regulation T, the most you’d be able to borrow from your brokerage to complete the trade is $5,000. You’d have to deposit another $5,000 of your own money into your brokerage account to meet the initial margin requirement. Or, if your brokerage sets the bar higher at 60% initial margin, you’d need to put up $6,000 in order to borrow the remaining $4,000.
What Is a Reg T Call?
Understanding the initial margin requirements is important for avoiding a Regulation T margin call. In general, a margin call happens when you fail to meet your brokerage’s requirements for trading in a margin account. Reg T calls occur when you fall short of the initial margin requirements. This could happen, for instance, if you’re trading options on margin or if you have an ACH deposit transaction that’s later reversed.
Regulation T margin calls are problematic, especially for self-directed investing, because you can’t make any additional trades in your account until you deposit money to meet the 50% initial margin requirement. If you don’t have cash on hand to deposit, then the brokerage could sell off securities in your account until the initial margin requirement is met.
Brokerages don’t always have to ask your permission to do this. They may not have to notify you first that they intend to sell your securities either. That’s why it’s important to fully understand the Reg T requirements to ensure that your account is always in good standing with regard to initial margin limits.
How to Handle a Reg T Call
If you receive a Reg T margin call, it’s important to respond quickly. While federal regulations allow a maximum window (typically up to three business days from the trade date) to satisfy the call, many brokerages enforce stricter “house rules” that require a faster response. To resolve a Reg T call, you generally have two main choices:
• Deposit Settled Cash: The cleanest and fastest way to meet the call is to wire or transfer settled cash directly into your account to cover the full dollar amount of the deficit.
• Deposit Margin-Eligible Securities: You can transfer fully paid, marginable securities from another brokerage account. Keep in mind that marginable stocks typically only provide a certain percentage of their market value toward the requirement, so you typically need to deposit securities worth more the cash deficit, as determined by the brokerage.
• Selling Securities in Your Account: While this is an option, investors must typically sell securities with a value that’s substantially higher than the value of the call, depending on the house requirement.
Recommended: Stock Market Basics
The Takeaway
Regulation T is used to determine initial margin requirements — i.e., the amount of cash or equity an investor must keep available in their account, relative to the amount they’ve borrowed. Margin trading may be profitable for investors, though it’s important to understand the risks involved. Specifically, investors need to know what could trigger a Regulation T margin call, and what that might mean for their portfolios.
An investor who fails to meet the initial margin requirements may be subject to a Reg T call, which is problematic because they are restricted from making additional trades until they deposit the 50% initial margin requirement. If the investor doesn’t have cash on hand to deposit, then the brokerage can sell off securities in the account until the initial margin requirement is met.
If you’re an experienced trader and have the risk tolerance to try out trading on margin, consider enabling a SoFi margin account. With a SoFi margin account, experienced investors can take advantage of more investment opportunities, and potentially increase returns. That said, margin trading is a high-risk endeavor, and using margin loans can amplify losses as well as gains.
FAQ
Does Regulation T apply to cash accounts?
Regulation T does apply to cash accounts in that it dictates how transactions and payments are handled. Specifically, there are rules related to making full payments for securities from cash accounts (no borrowed funds), and no free-riding, or buying and then selling a security before you’ve paid for it in full.
What is the difference between Reg T and maintenance margin?
Reg T dictates initial margin, or the percentage of a purchase price investors need to pay with their own money to open a position. Maintenance margin, on the other hand, refers to the minimum equity investors need to keep in their account after the purchase. They’re somewhat related, but distinct.
Can you buy options on margin under Regulation T?
Options contracts cannot be purchased on margin. Margin rules for options trading differ from those that apply to buying stocks or futures on margin. Options traders must pay the full premium to buy options contracts. Options margin is still required, but it’s provided by investors as collateral for a trade rather than a percentage of the purchase price.
What happens if you ignore a Reg T call?
If an investor ignores a Reg T call, it’s possible that their brokerage will sell off or liquidate their securities in their account in order to cover the shortfall, and could also bar them from trading in the future.
How often do Regulation T requirements change?
Regulation T requirements are amended on occasion, and were most recently changed in April 2026, related to specific designations and minimum equity thresholds.
Photo credit: iStock/loveguli
This content is for educational and informational purposes only. The products, services, or features discussed may not currently be available via the SoFi platform. Any references to third-party products, services, or companies do not constitute an endorsement, recommendation, or solicitation by SoFi. Readers should independently evaluate their options and consider their individual financial needs and circumstances before making any decisions. ©2026 SoFi Technologies, Inc. All rights reserved.
Options involve substantial risk of loss and the possibility an investor may lose the entire amount invested. Before starting options trading, investors should be familiar with the Characteristics and Risks of Standardized Options . TTax implications with options should be considered. Consult your tax advisor to understand any impacts to your taxes.
Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®
SOIN-Q326-086