Non-Marginable Securities

AAA

DEFINITION of '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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Penny Stock

    A stock that trades at a relatively low price and market capitalization, ...
  2. Margin

    1. Borrowed money that is used to purchase securities. This practice ...
  3. Margin Call

    A broker's demand on an investor using margin to deposit additional ...
  4. Over-The-Counter Bulletin Board ...

    A regulated electronic trading service offered by the National ...
  5. Beta

    A measure of the volatility, or systematic risk, of a security ...
  6. Open Trade Equity (OTE)

    Open trade equity (OTE) is the equity in an open futures contract.
RELATED FAQS
  1. How are the interest charges calculated on my margin account?

    One way that investors borrow funds from brokerages is through margin accounts; it is these interest charges that allow them ... Read Full Answer >>
  2. What are the minimum margin requirements for a short sale account?

    In a short sale transaction, the investor borrows shares and sells them on the market in the hope that the share price will ... Read Full Answer >>
  3. How is a leveraged buyout different from a buyout?

    In finance, a buyout refers to a purchase of voting stock of a target firm by an acquiring company, where the acquirer gains ... Read Full Answer >>
  4. What risks are associated with a closed end investment?

    A closed-end fund is an investment instrument that is listed on an exchange and trades much like common stock shares. Its ... Read Full Answer >>
  5. How does operating leverage affect business risk?

    In finance, companies assess their business risk by capturing a variety of factors that may result in lower-than-anticipated ... Read Full Answer >>
  6. How can I calculate degree of operating leverage on Excel?

    The degree of operating leverage measures how a given percent change in sales will affect a company's earnings before interest ... Read Full Answer >>
Related Articles
  1. Options & Futures

    Price Volatility Vs. Leverage

    Learn how to effectively gauge the risk of the markets you trade.
  2. Investing Basics

    The Lowdown On Penny Stocks

    Think penny stocks will make you rich? If you don't understand the risks, you could end up penniless.
  3. Options & Futures

    Margin Trading

    Find out what margin is, how margin calls work, the advantages of leverage and why using margin can be risky.
  4. Stock Analysis

    Adjusting Price Charts To Secondary Offerings

    Secondary offerings may require rapid readjustment of trading strategies.
  5. Investing

    How To Track Upcoming IPOs

    Interested in investing through IPOs? Here is the list of free sources for information on upcoming IPOs.
  6. Investing

    Three Portfolio Moves To Consider Now

    What portfolio moves should you consider making as the 2nd quarter kicks off? Before we focus on the future, let’s first reflect on the 1st Q surprises.
  7. Brokers

    Private Equity's Returns Are Tempered By Its Risks

    Private equity firms adopt approaches to quickly hike up earnings and boost returns, but these investments come with big risks too.
  8. Credit & Loans

    The Pros & Cons Of Personal Loans vs. Credit Cards

    One is not like the other. We help you decide where to borrow money from.
  9. Brokers

    Interested in Derivative Products? Try CFDs

    A short article about the main risks and rewards of CFDs. These derivatives can help boost returns using leverage, but they could also magnify losses.
  10. Fundamental Analysis

    What is Gearing?

    Gearing, also called leverage, is the degree to which a company’s operations are funded by lenders versus shareholders.

You May Also Like

Hot Definitions
  1. Coupon

    The interest rate stated on a bond when it's issued. The coupon is typically paid semiannually. This is also referred to ...
  2. Redemption

    The return of an investor's principal in a fixed income security, such as a preferred stock or bond; or the sale of units ...
  3. Standard Error

    The standard deviation of the sampling distribution of a statistic. Standard error is a statistical term that measures the ...
  4. Capital Stock

    The common and preferred stock a company is authorized to issue, according to their corporate charter. Capital stock represents ...
  5. Unearned Revenue

    When an individual or company receives money for a service or product that has yet to be fulfilled. Unearned revenue can ...
Trading Center