Title 15 — Commerce and TradeRelease 119-73
§78g Margin requirements
Title 15 › Chapter CHAPTER 2B— - SECURITIES EXCHANGES › § 78g
Summary
The Federal Reserve must make rules that limit how much loaned money people can use to buy or hold stocks and similar securities. For the first loan on a security, the Fed’s rule must let customers borrow no more than the higher of 55% of that security’s current market price or 100% of the lowest market price in the past 36 calendar months, but that amount may not exceed 75% of the current market price. The Fed can set lower limits to help business or higher limits to stop too much borrowing. Brokers and dealers must follow the Fed’s margin rules when they lend or keep credit for customers. Special margin rules apply to security futures products; the Fed (or the SEC and the CFTC together, if the Fed lets them) must set initial and maintenance margins so markets stay safe, systemic risk is avoided, and margins match comparable option contracts, with security futures margins not lower than the lowest comparable option margin (excluding premium). Some people who are not brokers also must follow Fed rules against using loans to buy or carry securities, but there are common exceptions, such as loans made by someone not in the ordinary business of lending, exempted securities, certain dealer-to-dealer or market-maker financing, bank loans on non-equity securities, or other exemptions the Fed allows. Loans made before June 6, 1934 are mostly not covered until July 1, 1937, except to stop ways of evading the rules. It is also illegal for a United States person (a U.S. citizen or resident, or a domestic company, estate, or trust with more than 50% U.S. ownership) or a foreign person controlled by a U.S. person (more than 50% U.S. control) to use foreign credit to buy U.S. securities if that credit would be banned under these rules. A broker does not count as extending credit when there is a genuine delayed-delivery sale of a mortgage-related or small-business security if full payment is made on delivery within 180 days (or a shorter period the Fed sets).
Full Legal Text
Title 15, §78g
Commerce and Trade — Source: USLM XML via OLRC
(a)For the purpose of preventing the excessive use of credit for the purchase or carrying of securities, the Board of Governors of the Federal Reserve System shall, prior to October 1, 1934, and from time to time thereafter, prescribe rules and regulations with respect to the amount of credit that may be initially extended and subsequently maintained on any security (other than an exempted security or a security futures product). For the initial extension of credit, such rules and regulations shall be based upon the following standard: An amount not greater than whichever is the higher of—
(1)55 per centum of the current market price of the security, or
(2)100 per centum of the lowest market price of the security during the preceding thirty-six calendar months, but not more than 75 per centum of the current market price.
(b)Notwithstanding the provisions of subsection (a) of this section, the Board of Governors of the Federal Reserve System, may, from time to time, with respect to all or specified securities or transactions, or classes of securities, or classes of transactions, by such rules and regulations (1) prescribe such lower margin requirements for the initial extension or maintenance of credit as it deems necessary or appropriate for the accommodation of commerce and industry, having due regard to the general credit situation of the country, and (2) prescribe such higher margin requirements for the initial extension or maintenance of credit as it may deem necessary or appropriate to prevent the excessive use of credit to finance transactions in securities.
(c)(1)It shall be unlawful for any member of a national securities exchange or any broker or dealer, directly or indirectly, to extend or maintain credit or arrange for the extension or maintenance of credit to or for any customer—
(A)on any security (other than an exempted security), except as provided in paragraph (2), in contravention of the rules and regulations which the Board of Governors of the Federal Reserve System (hereafter in this section referred to as the “Board”) shall prescribe under subsections (a) and (b); or
(B)without collateral or on any collateral other than securities, except in accordance with such rules and regulations as the Board may prescribe—
(i)to permit under specified conditions and for a limited period any such member, broker, or dealer to maintain a credit initially extended in conformity with the rules and regulations of the Board; and
(ii)to permit the extension or maintenance of credit in cases where the extension or maintenance of credit is not for the purpose of purchasing or carrying securities or of evading or circumventing the provisions of subparagraph (A).
(2)(A)It shall be unlawful for any broker, dealer, or member of a national securities exchange to, directly or indirectly, extend or maintain credit to or for, or collect margin from any customer on, any security futures product unless such activities comply with the regulations—
(i)which the Board shall prescribe pursuant to subparagraph (B); or
(ii)if the Board determines to delegate the authority to prescribe such regulations, which the Commission and the Commodity Futures Trading Commission shall jointly prescribe pursuant to subparagraph (B).
(B)The Board shall prescribe, or, if the authority is delegated pursuant to subparagraph (A)(ii), the Commission and the Commodity Futures Trading Commission shall jointly prescribe, such regulations to establish margin requirements, including the establishment of levels of margin (initial and maintenance) for security futures products under such terms, and at such levels, as the Board deems appropriate, or as the Commission and the Commodity Futures Trading Commission jointly deem appropriate—
(i)to preserve the financial integrity of markets trading security futures products;
(ii)to prevent systemic risk;
(iii)to require that—
(I)the margin requirements for a security future product be consistent with the margin requirements for comparable option contracts traded on any exchange registered pursuant to section 78f(a) of this title; and
(II)initial and maintenance margin levels for a security future product not be lower than the lowest level of margin, exclusive of premium, required for any comparable option contract traded on any exchange registered pursuant to section 78f(a) of this title, other than an option on a security future;
(iv)to ensure that the margin requirements (other than levels of margin), including the type, form, and use of collateral for security futures products, are and remain consistent with the requirements established by the Board, pursuant to subparagraphs (A) and (B) of paragraph (1).
(3)This subsection and the rules and regulations issued under this subsection shall not apply to any credit extended, maintained, or arranged by a member of a national securities exchange or a broker or dealer to or for a member of a national securities exchange or a registered broker or dealer—
(A)a substantial portion of whose business consists of transactions with persons other than brokers or dealers; or
(B)to finance its activities as a market maker or an underwriter;
(d)(1)It shall be unlawful for any person not subject to subsection (c) to extend or maintain credit or to arrange for the extension or maintenance of credit for the purpose of purchasing or carrying any security, in contravention of such rules and regulations as the Board shall prescribe to prevent the excessive use of credit for the purchasing or carrying of or trading in securities in circumvention of the other provisions of this section. Such rules and regulations may impose upon all loans made for the purpose of purchasing or carrying securities limitations similar to those imposed upon members, brokers, or dealers by subsection (c) and the rules and regulations thereunder.
(2)This subsection and the rules and regulations issued under this subsection shall not apply to any credit extended, maintained, or arranged—
(A)by a person not in the ordinary course of business;
(B)on an exempted security;
(C)to or for a member of a national securities exchange or a registered broker or dealer—
(i)a substantial portion of whose business consists of transactions with persons other than brokers or dealers; or
(ii)to finance its activities as a market maker or an underwriter;
(D)by a bank on a security other than an equity security; or
(E)as the Board shall, by such rules, regulations, or orders as it may deem necessary or appropriate in the public interest or for the protection of investors, exempt, either unconditionally or upon specified terms and conditions or for stated periods, from the operation of this subsection and the rules and regulations thereunder.
(3)The Board may impose such rules and regulations, in whole or in part, on any credit otherwise exempted by subparagraph (C) if it determines that such action is necessary or appropriate in the public interest or for the protection of investors.
(e)The provisions of this section or the rules and regulations thereunder shall not apply on or before July 1, 1937, to any loan or extension of credit made prior to June 6, 1934, or to the maintenance, renewal, or extension of any such loan or credit, except to the extent that the Board of Governors of the Federal Reserve System may by rules and regulations prescribe as necessary to prevent the circumvention of the provisions of this section or the rules and regulations thereunder by means of withdrawals of funds or securities, substitutions of securities, or additional purchases or by any other device.
(f)(1)It is unlawful for any United States person, or any foreign person controlled by a United States person or acting on behalf of or in conjunction with such person, to obtain, receive, or enjoy the beneficial use of a loan or other extension of credit from any lender (without regard to whether the lender’s office or place of business is in a State or the transaction occurred in whole or in part within a State) for the purpose of (A) purchasing or carrying United States securities, or (B) purchasing or carrying within the United States of any other securities, if, under this section or rules and regulations prescribed thereunder, the loan or other credit transaction is prohibited or would be prohibited if it had been made or the transaction had otherwise occurred in a lender’s office or other place of business in a State.
(2)For the purposes of this subsection—
(A)The term “United States person” includes a person which is organized or exists under the laws of any State or, in the case of a natural person, a citizen or resident of the United States; a domestic estate; or a trust in which one or more of the foregoing persons has a cumulative direct or indirect beneficial interest in excess of 50 per centum of the value of the trust.
(B)The term “United States security” means a security (other than an exempted security) issued by a person incorporated under the laws of any State, or whose principal place of business is within a State.
(C)The term “foreign person controlled by a United States person” includes any noncorporate entity in which United States persons directly or indirectly have more than a 50 per centum beneficial interest, and any corporation in which one or more United States persons, directly or indirectly, own stock possessing more than 50 per centum of the total combined voting power of all classes of stock entitled to vote, or more than 50 per centum of the total value of shares of all classes of stock.
(3)The Board of Governors of the Federal Reserve System may, in its discretion and with due regard for the purposes of this section, by rule or regulation exempt any class of United States persons or foreign persons controlled by a United States person from the application of this subsection.
(g)Subject to such rules and regulations as the Board of Governors of the Federal Reserve System may adopt in the public interest and for the protection of investors, no member of a national securities exchange or broker or dealer shall be deemed to have extended or maintained credit or arranged for the extension or maintenance of credit for the purpose of purchasing a security, within the meaning of this section, by reason of a bona fide agreement for delayed delivery of a mortgage related security or a small business related security against full payment of the purchase price thereof upon such delivery within one hundred and eighty days after the purchase, or within such shorter period as the Board of Governors of the Federal Reserve System may prescribe by rule or regulation.
Legislative History
Notes & Related Subsidiaries
Editorial Notes
Amendments
2010—Subsec. (c)(1)(A). Pub. L. 111–203 substituted “; or” for “; and” at end. 2000—Subsec. (a). Pub. L. 106–554, § 1(a)(5) [title II, § 206(b)(1)], inserted “or a security futures product” after “exempted security” in introductory provisions. Subsec. (c)(1)(A). Pub. L. 106–554, § 1(a)(5) [title II, § 206(b)(2)], inserted “except as provided in paragraph (2),” after “security),”. Subsec. (c)(2), (3). Pub. L. 106–554, § 1(a)(5) [title II, § 206(b)(3), (4)], added par. (2) and redesignated former par. (2) as (3). 1998—Subsecs. (a), (b). Pub. L. 105–353, § 301(b)(5), substituted “Board of Governors of the Federal Reserve System” for “Federal Reserve Board”. Subsec. (d). Pub. L. 105–353, § 301(b)(6), substituted “exceptions” for “exception” in heading. 1996—Subsec. (c). Pub. L. 104–290, § 104(a)(1), amended heading and text of subsec. (c) generally. Prior to amendment, text read as follows: “It shall be unlawful for any member of a national securities exchange or any broker or dealer, directly or indirectly, to extend or maintain credit or arrange for the extension or maintenance of credit to or for any customer— “(1) on any security (other than an exempted security), in contravention of the
Rules and Regulations
which the Board of Governors of the Federal Reserve System shall prescribe under subsections (a) and (b) of this section; “(2) without collateral or on any collateral other than securities, except in accordance with such
Rules and Regulations
as the Board of Governors of the Federal Reserve System may prescribe (A) to permit under specified conditions and for a limited period any such member, broker, or dealer to maintain a credit initially extended in conformity with the
Rules and Regulations
of the Board of Governors of the Federal Reserve System, and (B) to permit the extension or maintenance of credit in cases where the extension or maintenance of credit is not for the purpose of purchasing or carrying securities or of evading or circumventing the provisions of paragraph (1) of this subsection.” Subsec. (d). Pub. L. 104–290, § 104(a)(2), amended heading and text of subsec. (d) generally. Prior to amendment, text read as follows: “It shall be unlawful for any person not subject to subsection (c) of this section to extend or maintain credit or to arrange for the extension or maintenance of credit for the purpose of purchasing or carrying any security, in contravention of such
Rules and Regulations
as the Board of Governors of the Federal Reserve System shall prescribe to prevent the excessive use of credit for the purchasing or carrying of or trading in securities in circumvention of the other provisions of this section. Such
Rules and Regulations
may impose upon all loans made for the purpose of purchasing or carrying securities limitations similar to those imposed upon members, brokers, or dealers by subsection (c) of this section and the
Rules and Regulations
thereunder. This subsection and the
Rules and Regulations
thereunder shall not apply (A) to a loan made by a person not in the ordinary course of his business, (B) to a loan on an exempted security, (C) to a loan to a dealer to aid in the financing of the distribution of securities to customers not through the medium of a national securities exchange, (D) to a loan by a bank on a security other than an equity security, or (E) to such other loans as the Board of Governors of the Federal Reserve System shall, by such
Rules and Regulations
as it may deem necessary or appropriate in the public interest or for the protection of investors, exempt, either unconditionally or upon specified terms and conditions or for stated periods, from the operation of this subsection and the
Rules and Regulations
thereunder.” 1994—Subsec. (g). Pub. L. 103–325 inserted “or a small business related security” after “mortgage related security”. 1984—Subsec. (g). Pub. L. 98–440 added subsec. (g). 1970—Subsec. (f). Pub. L. 91–508 added subsec. (f). 1968—Subsec. (a). Pub. L. 90–437, § 1(1), struck out “registered on a national securities exchange” after “(other than an exempted security)”. Subsec. (c). Pub. L. 90–437, § 1(2), struck out “who transacts a business in securities through the medium of any such member” after “any broker or dealer”, in par. (1) struck out “registered on a national securities exchange” after “(other than an exempted security)”, and in par. (2) substituted “other than securities” for “other than exempted securities and/or securities registered upon a national securities exchange”. Subsec. (d). Pub. L. 90–437, § 1(3), struck out “registered on a national securities exchange” after “the purpose of purchasing or carrying any security”, and “registered on national securities exchanges” after “the purpose of purchasing or carrying securities”.
Statutory Notes and Related Subsidiaries
Change of Name
Act Aug. 23, 1935, in subsec. (e), substituted “Board of Governors of the Federal Reserve System” for “Federal Reserve Board”.
Effective Date
of 2010 AmendmentAmendment by Pub. L. 111–203 effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as an
Effective Date
note under section 5301 of Title 12, Banks and Banking.
Effective Date
of 1970 AmendmentAmendment by Pub. L. 91–508 effective on first day of seventh calendar month which begins after Oct. 26, 1970, except as otherwise provided in section 401(c) of Pub. L. 91–508, see section 401(a) of Pub. L. 91–508, set out as a note under section 1951 of Title 12, Banks and Banking. Pub. L. 91–508, title IV, § 401(c), Oct. 26, 1970, 84 Stat. 1125, provided that: “The Board of Governors of the Federal Reserve System may by regulation provide that the amendment made by title III [amending this section] shall be effective on any date not earlier than the publication of the regulation in the Federal Register and not later than the first day of the thirteenth calendar month which begins after the date of enactment [Oct. 26, 1970].” Validity of
Rules and Regulations
Pub. L. 91–508, title III, § 301(b), Oct. 26, 1970, 84 Stat. 1125, provided that: “The amendment made by subsection (a) of this section [amending this section] does not affect the continuing validity of any rule or regulation under section 7 of the Securities Exchange Act of 1934 [this section] in effect prior to the
Effective Date
of the amendment.”
Reference
Citations & Metadata
Citation
15 U.S.C. § 78g
Title 15 — Commerce and Trade
Last Updated
Apr 6, 2026
Release point: 119-73