What is margin trading?

A kind of trading that allows a broker to advance for the customer/investor part of the purchase price of the security and to keep it as collateral for such advance.

What is the margin allowance standard?

The credit extended must be for an amount not greater than, whichever is higher of:

1. 65% of the current market price of the security; or

2. 100% of the lowest market price during the preceding 36 months, but not more than 75% of the current market price.

What are the purposes of the margin requirements?

They are primarily intended to achieve a macroeconomic purpose – the protection of the overall economy from excessive speculation in securities. Their recognized secondary purpose is to protect small investors.

Who has the burden of compliance with margin requirements?

The brokers and dealers. Note: In securities trading, the brokers are essentially the counterparties to the stock transactions at the Exchange. Since the principals of the broker are generally undisclosed, the broker is personally liable for the contracts thus made. Brokers have a right to be reimbursed for sums advanced by them with the express or implied authorization of the principal. (Abacus Securities Corporation v. Ampil, G.R. No. 160016, Feb. 27, 2006)