Answer · Answered · Stock Trading
Why Isn't My Stock Marginable? Price, Listing and House Rules
When a stock isn't marginable, the reason usually sits either in the federal definition of what can carry a loan or in your broker's own list of stocks it will not lend against.
The short answer
A stock is not marginable when it falls outside Regulation T's definition of margin-eligible securities, which broadly covers exchange-listed stocks and leaves out most over-the-counter shares, or when your broker excludes it. Brokers commonly refuse loan value on low-priced, very volatile, thinly traded or newly listed stocks and can set a 100% requirement on any name they consider risky.
The positions screen says “Loan value: $0.00”. Or you deposit shares and the buying power figure refuses to move. Either way, the broker has decided that this stock supports no borrowing. You can still own it. You just pay for all of it.
The reasons come in layers. The first is federal. The next belongs to your broker, and that is the one that changes without warning.
What does Regulation T let a broker lend against?
The Federal Reserve Board’s Regulation T decides which securities may carry loan value. Broadly, that means stocks listed on a national securities exchange. Most over-the-counter shares fall outside it, which is why a stock bought over the counter usually shows no loan value from the day it lands in the account, however long the company has existed and however steady its price has been.
For the stocks that do qualify, Regulation T also sets the 50% opening requirement. Initial margin covers how that works on a purchase.
Why would a broker refuse a listed stock?
Collateral risk. The broker lends against your shares on the assumption it can sell them quickly for close to the screen price if you fail to meet a call, and any stock that makes that assumption shaky is a candidate for exclusion, whatever exchange it trades on. Each firm keeps its own list. The usual reasons look like this.
Low prices. Many firms set a share price below which a stock carries no loan value. The cut-off differs from broker to broker.
Volatility. A stock that can lose a third of its value in a session makes poor collateral. Brokers raise the requirement on it, sometimes all the way to 100%.
Thin trading. If few shares change hands each day, a forced sale of a large block pushes the price down on the way out.
Recent listing. New shares often start with no loan value, and many brokers want some trading history after an IPO before they will lend, while the approaching end of a lockup period, when insiders become free to sell and a wave of new supply can hit the price, gives a cautious firm another reason to wait.
Concentration can also lift the requirement on a stock that is otherwise marginable. It happens when that one name dominates the account. The stock keeps some loan value, but less of it, and the call price on the position moves up accordingly.
What difference does it make to buying power?
A lot. Take $10,000 of cash and two hypothetical stocks, one marginable and one not.
Look at the last line. A non-marginable holding adds nothing to borrowing capacity, however large it grows, so an account full of such stocks can show a big market value and almost no buying power. The general limits are set out in how much you can borrow on margin.
What if a stock loses marginability while you hold it?
That is the dangerous case. Suppose you own $20,000 of a hypothetical stock with a $10,000 loan against it. After a sharp fall, the broker moves the stock to a 100% requirement. You now need $20,000 of equity in the position. You have $10,000.
The shortfall arrives as a $10,000 call. It is due whether or not the stock moved on the day of the change, and if you cannot meet it the broker can sell the shares, which may mean selling a stock that has just fallen sharply, at whatever price the next buyer will pay, on a schedule the broker sets.
Does the same apply to funds and options?
Similar logic, different details. Leveraged and inverse funds commonly carry higher maintenance requirements, both under FINRA’s rule and at brokers, because a fund built to move two or three times as far as its index can burn through collateral quickly. Listed options due to expire within nine months carry no loan value at all, so you pay the full premium. Check your broker’s requirements page for each type of holding before assuming it behaves like an ordinary listed stock.
Can you do anything about it?
Not much, for a given stock. You can ask whether the exclusion is a house decision or a regulatory one. A house rule is the firm’s call, and another broker may treat the same stock differently.
What you control is how hard you lean on borrowing against names near any of the usual cut-offs. Read the maintenance margin your broker applies to them. The stock trading section covers the rest of what sits behind an order.
Readers also ask
Can a stock become non-marginable after you buy it?
Yes. Brokers review their lists and can raise a stock's requirement to 100% after a price collapse, a spike in volatility or a change in listing. If you had borrowed against the stock, the change can produce a margin call overnight even though the price did not move that day.
Can you still buy a non-marginable stock in a margin account?
Yes, you just pay for it in full with cash or with borrowing capacity from other holdings. The position then sits in the account with no loan value of its own, so it does not help support any debit balance you carry against the rest of the portfolio.