DEFINITION of 'Marginable'

A security is marginable if it can be traded on margin through a brokerage or other financial institution. Securities with high liquidity and market capitalization are more likely to be marginable. Other securities, such as stocks priced below $5/share, are not marginable.

The rules governing which securities are marginable and which are not are set out in Regulation T and Regulation U of the Federal Reserve. Self-regulatory organizations such as the NYSE and FINRA‚Äč are also involved in the regulatory process. Although individual brokers can adopt their own requirements, they must be at least as strict as those prescribed by law.

BREAKING DOWN 'Marginable'

The distinction between marginable and non-marginable securities exists for two main reasons. First, it protects investors by reducing the risks associated with the use of leverage. Second, it protects brokers and other financial institutions by ensuring that the collateral they receive from investors meets minimum standards of quality.