H.R. 10553: Margin Eligibility Modernization Act

This bill would require the Federal Reserve to update Regulation T, which governs how much credit brokers can extend to investors for purchasing securities on margin.

What would change

• Within 90 days of enactment, the Federal Reserve would have to revise the definition of “OTC margin stock”.
• The new definition would include any over-the-counter equity security that has a “ready market” under existing securities rules.
• If the Federal Reserve does not issue the required rule within 90 days, the broader definition would apply automatically until the rule is issued.

Practical effect

In plain terms, the bill would make more over-the-counter stocks eligible for margin trading. That means investors could potentially borrow money from brokers to buy a wider range of OTC stocks, as long as those stocks meet the “ready market” standard.

Reporting requirement

Five years after the rule is issued, the Federal Reserve would have to send Congress a report on:

• how much credit was extended because of the rule, and
• any related risks to the financial system.

Relevant Companies

None found