Dear- After opening real IB account, I was curious IB really check my FICO score. I understand that in the margin account, we might be uderwatered. For example, with initial seed of 10K, if market is down like 1929+1987+2008, then we may need to pay 20K back to IB. (total 30K loss) Therefore, except CASH-ONLY account, IB want my score and WILL make me bad-credit man in case it happes. What FICO score is required for margin account opening? Roughly 700 or 600? How about "pattern"(in my understanding, we do NOT pay all when acquired) FICO score? In this case, unlike margin with interest, we do NOT pay any interest at all
In general, most Brokers don't check your credit for either cash or general margin accounts. They will always check your credit for a portfolio margin account. Reg-T accounts, in general, have enough collateral from the securities in the account while a PM account is considered to have a higher level of risk, so treated more like a loan. Not a guarantee, but I don't think they will check your credit. Bob
Personally I rarely use margin. But I like and used to trade as follows. I buy 100 MSFT at $20 Monday and pay only 20% of the total $2000, which cost only $400 at the time od execution. Of course I have to pay the rest ($160) in settlement day(Friday) to complete. This is a lot different from margin, since we never pay ANY INTEREST at all. Is this Reg-T?
No. Reg-t margin requires putting up at least 50% of the value of the securities. If you buy $10,000 worth of MSFT, you must have $5000 or more in your account. http://www.investopedia.com/terms/r/regulationt.asp
Thanks rmorse for helpful comment to beginner. So FRB set the 50% like global interest rate. So there is NO trade with less than 50% at all especially in US market? In some country, for 10k worth of MSFT, it is possible to pay 3K as proof of purchase and have pay the rest(7K) in the settllement day. Of course if you do not prepare the 7K in your account in settlement day, your MSFT is sold (default) in the next morning, even without telling you. If it happens, you cannot do this for ONE month, which means that you pay all at the time of execution. I heard that, before great depression in 1929, it was 10% instead of the 50% set by FRB. Greatest bubble in stock market in 1920s.
I don't have any information on margin requirements in other countries. I'm only talking about US securities and margin account in the US. If you account is oversees, you will have to call your broker for more information. If you have an IB account, when you enter a trade on TWS, you can right Click on the order before hitting "transmit", choose "Check Margin Impact". It will show you you-Current margin, change, post trade margin. BTW: Online electronic brokers don't allow for margin calls. You will be expected to have you money available prior to trading.
Good to hear "margin impact", which I heard first time in my life. For the great depression in 1929 above. see for margin rate.
Specifically see from 5 min for the total 10 min clip in It says "cash of 1K is needed for 10K purchase"
Why do you have to keep opening new threads? Can't you keep your questions in one and stop polluting the board? We already know you are a f'n beginner...don't reinforce it.