Question

What does Regulation T require for the short sale of securities?

Answer 1

Regulation T requires investors to have a minimum amount of funds in their account before they can sell securities short. It sets forth the initial margin requirements for customers who engage in the short sale of securities.

Step-by-step explanation:

Regulation T is a rule by the Federal Reserve Board that sets forth the initial margin requirements for customers who engage in the short sale of securities. It requires investors to have a minimum amount of funds in their account before they can sell securities short. The purpose of Regulation T is to prevent excessive speculation and maintain the stability of the market.

Here are the requirements for the short sale of securities under Regulation T:

1. Investors must have a minimum of 50% of the current market value of the securities they are selling short.
2. The remaining 50% of the market value is typically borrowed from the broker-dealer through a margin account.
3. The proceeds from the short sale are used to repay the borrowed funds.