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Nonmarginable Securities

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Nonmarginable Securities

What Does Nonmarginable Securities Mean?

Securities that cannot be purchased on margin. Some classes of securities, such as recent initial public offerings (IPOs), over-the-counter bulletin board stocks, and penny stocks, are nonmarginable 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. Nonmarginable securities must be paid for 100% with the investor's own cash, and holdings in nonmarginable securities do not add to the investor's margin buying power.

Investopedia explains Nonmarginable Securities

Most brokerage firms have their own internal lists of nonmarginable 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 nonmarginable is to mitigate investor risk and control the administrative costs of excessive margin calls.

Related Terms:
Margin
Margin Account
Margin Call
Over-the-Counter Bulletin BoardOTCBB
Penny Stock



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