# Regulation T

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[Federal Reserve Board](/source/Federal_Reserve_Board) '''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).<ref name="FRB">[http://www.federalreserve.gov/regulations/default.htm#t Federal Reserve Website]</ref>  

Regulation T governs the extension of credit by securities brokers and dealers in the United States.<ref name=FRB/>
Its best-known function is the control of [margin](/source/Margin_(finance)) requirements for stocks bought on margin. The initial [margin requirement](/source/margin_requirement) for such margin stock purchases has been 50%<ref>[https://www.ecfr.gov/current/title-12/chapter-II/subchapter-A/part-220/section-220.12 Text of 12 CFR §220.12]</ref> since 1974,<ref>[https://www.bostonfed.org/economic/neer/neer2000/neer500b.htm Fortune, Peter, "Margin Requirements, Margin Loans, and Margin Rates: Practice and Principles", ''New England Economic Review'', Sep.–Oct. 2000]</ref> 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](/source/systemic_risk) 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](/source/volatility_(finance)) in the equities markets.<ref>{{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}}</ref>

==References==
<references/>

==External links==
* [https://web.archive.org/web/20151022000651/http://www.ecfr.gov/cgi-bin/text-idx?tpl=%2Fecfrbrowse%2FTitle12%2F12cfr220_main_02.tpl Text of Regulation T]

Category:Federal Reserve System
Category:Margin policy
Category:Code of Federal Regulations

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