Margin Requirements

Margin requirements are intended to help protect securities firms and their customers from some of the risks associated with leveraging investments by requiring customers to either meet or maintain certain levels of equity in their account.

• Requirement Types
• Equity and Mutual Fund Requirements
• Fixed-Income Requirements
• Covered Option Margin Requirements
• Uncovered Option Margin Requirements

Requirement Types

There are two primary types of margin requirements: initial and maintenance.

Initial/Reg T Requirements

An initial margin requirement is the amount of funds required to satisfy a purchase or short sale of a security in a margin account. The initial margin requirement is currently 50% of the purchase price for most securities, and it is known as the Reg T or the Fed requirement, which is set by the Federal Reserve Board. In addition, Fidelity requires customers to have a minimum account equity of $5,000 when placing orders on margin.

Maintenance Requirements

Ongoing margin requirements after the purchase is complete are known as maintenance requirements, which require that you maintain a certain level of equity in your margin account. Maintenance requirements are set by the NYSE, FINRA, and/or the brokerage firm.

At Fidelity, house maintenance requirements are systematically applied based on the composition of an account. These are called Rules Based Requirements (RBR). RBR applies changes to requirements based on the changes in the positions held in an account on a daily basis. In this way, the aggregate requirement truly reflects the risk in an account based on the current structure of the portfolio. Fidelity, as well as other broker dealers, has the right to modify the maintenance requirements on specific securities and individual customer accounts.

RBR is applied to accounts with a margin debit balance greater than $10,000 or any short position in a Margin or Short account. Accounts that do not meet these criteria will receive base requirements. RBR is applied to stocks, corporate bonds, municipal bonds, treasuries and preferred stock. Options requirements are not impacted by RBR.

RBR examines individual accounts and calculates requirements based on portfolio attributions (add-on percentages), which are added to the existing base requirements. RBR requirements are additive, i.e., any one security could qualify for more than just one type of add-on with a maximum requirement of 100%. The account level add-ons are:

• Issuer (Position) Concentration: Concentration of a position held versus the account's gross market value
• Liquidity: Concentration based on the trading volume of a security
• Ownership Concentration: Concentration based on all the securities held of a common issuer
• Industry Concentration: Concentration based on all the securities held in a common industry

Viewing Margin Requirements

To see the most current base margin maintenance requirements that apply to your account, select the Margin Requirements link on the Trade Stocks page, Balances page, or the Positions page.

Fidelity provides the margin maintenance requirement for all securities held in your account, as well as the ability for you to enter symbols and retrieve the maintenance requirement for securities not held in your account.

Note: All margin maintenance requirements displayed using the Margin Requirement tool are specific to the margin account through which you access the tool. Maintenance requirements may vary by account and may be subject to RBR add on requirements in addition to the base requirements. Fidelity requires customers to have a minimum account equity of $5,000 when placing orders on margin.

With respect to maintenance requirements on specific securities, Fidelity considers a number of factors, including the stock's trading volatility and liquidity, company earnings and market capitalization, as well as whether the account in question is in a concentrated position.

Example: If you purchase $20,000 of marginable stock with a 30% house margin requirement, you would need to initially deposit $10,000, which is the 50% Fed requirement. You would not need to deposit additional money beyond the $10,000 because the house maintenance requirement is below the 50% Fed requirement.

Let's say, however, the security purchased now makes up 80% of the gross market value of your portfolio. This security would be subject to an RBR add on of 30% bringing the house requirement to 60%. Since the account has a maintenance requirement higher than the Fed requirement, you would need to deposit funds to meet the higher requirement, rather than 30%. In this example, the security purchased increased the house maintenance requirement to 60% requiring a deposit a totaling $12,000. This amount is equal to 60% of the purchase price.

Note: Fidelity may impose a higher house maintenance requirement than the Fed requirement (or Reg T). In a situation where the maintenance requirement is the greater of the two, you must maintain an equity level at or above the higher requirement.

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Equity Requirements

Maintenance requirements are calculated using Rules Based Requirements in which the RBR add-ons are added to the base requirements. A majority of securities have base requirements of:

• Long side: 30%
• Short side: 35%

There may be instances where securities have higher base requirements. Some examples are distressed sectors, distressed issuers, and levered ETFs

Issuer (Position) Concentration - the market value of a position as a percent of the account's gross market value (position market value / portfolio gross market value).

Long positions