Understanding Margin

Investors are allowed to purchase securities on loan from their broker-dealer if they open a margin account. Buying securities on margin means to purchase them with credit. The investor pays for part of the price of the security and the broker-dealer loans the investor funds for the rest. Margin is the amount or percent of money the investor deposits. Debit balance is the amount of money borrowed. The broker-dealer is the investor’s creditor. The loans must be secured by the customer with money or securities and placed in a margin account established by the creditor.

The Securities Exchange Act of 193