Regulation T regulates the extension of credit by broker dealers for securities purchases. The federal reserve board or FRB sets the terms of regulation T.
The Securities Exchange Act of 1934 gave the authority to the Federal Reserve Board to regulate the extension of credit for securities purchases. Regulation T sets payment dates and initial margin requirement for securities purchases. An investor who purchases a security must pay for that trade 2 business days after the settlement date, or T+4. Regulation T also sets the initial margin requirements for investors who wish to borrow money to buy securities on margin. Regulation T requires that an investor deposit enough cash to cover 50% of the price of the securtiy.
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