What are 'Non-Marginable Securities'

Securities that cannot be purchased on margin at a particular brokerage or financial institution. Some classes of securities, such as recent initial public offerings (IPOs), over-the-counter bulletin board stocks, and penny stocks, are non-marginable by decree of the Federal Reserve Board. Other securities, such as stocks with share prices under $5 or with extremely high betas, may be excluded at the discretion of the broker itself.

Non-marginable securities must be 100% funded by the investor's own cash, and holdings in non-marginable securities do not add to the investor's margin buying power.

BREAKING DOWN 'Non-Marginable Securities'

Most brokerage firms have their own internal lists of non-marginable securities, which investors can find online or by contacting their institutions. These lists will be adjusted over time to reflect changes in share prices and volatility. The main goal of keeping some securities away from margin investors is to mitigate risk and control the administrative costs of excessive margin calls on what are usually volatile stocks with uncertain cash flows.

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