Legal Interpretations
Margin Requirements - 2000 Letters
January 7, 2000
To Mr. George Simon concerning the use of a cash account to buy and sell securities on the same day under section 220.8 of Regulation T (12 CFR 220). Section 220.8(a)(1)(ii) requires the creditor to accept in good faith the customer's agreement that the customer will make full cash payment for the security before selling it and does not contemplate selling it prior to making such payment. Accordingly, the purchase and sale of multiple securities before settlement date generally requires sufficient cash held in the account on trade date to cover all purchases or use of a margin account, which provides for netting of all trades effected on a single day.
January 6, 2000
To Mr. Mark Grewe concerning the use of a cash account under section 220.8 of Regulation T (12 CFR 220). A customer that holds fully paid securities in a cash account and, on the same trade date, sells and then repurchases the securities is not required to pay for the purchase with new funds if the securities are not resold prior to the settlement date.