What is T regulation?

T regulation T is a legal restriction of trading in the United States. It applies to investors who buy on a margin, which means they borrow money from their broker to buy shares. TEGULATION T means that investors have to give money that matches or exceeds the money they lend. It may apply to different investment styles, but usually simply includes lending money from a broker to buy shares or other securities in relation to T regulation. This increases the potential return of the investment, but also increases potential losses.

There is a legal restriction known as a minimum margin requirement. This describes in detail the share of the overall investment for any specific time to which the investor's own cash must be covered. If the security is to invest in value, the intermediary calls on the margin, which means that the investor will have to give the intermediary more money to restore. In most cases, this process is guaranteed by an investor using other securitiesy they own as collateral. If the investor needs to give more money to the broker, these additional securities are automatically sold.

historically, the requirement for a minimum margin was very high, which turned out to be problematic. This is because if the stock prices have fallen, they needed more investors to provide additional cash to their brokers to maintain a margin request. This often included the sale of other securities. The increase in sales reduced stock market prices further, which in turn meant that even more investors had to give their brokers more money and created a vicious circle. This formula has been quoted as an important factor in the 1929 stock market crash.

Since then, the minimum margin requirements have been much lower. The T regulation is a law that gives the federal booking to set the minimal depth to the edge of the UM. In 1974 the level was set at 50%, which meansthat anyone who buys a margin must provide at least half the value of the investment at the beginning, and the amount is provided as a broker loan limited to half the value of the investment.

It is important to realize that the T is only a legal limit. The broker can store stricter margin requirements to provide greater protection. These requirements will usually vary depending on the investor's trading and reliability history.