Series 99: 1.2.2.7 Cash And Margin Accounts

1.2.2.7  Cash and Margin Accounts

Accounts can also be classified by what types of transactions can be executed in the account and how the transactions are paid for. When a customer opens a cash account, he must deposit 100% of the cost of the security in the account by the time the transaction settles. Customers are allowed two additional days after the settlement date to pay for the security. Thus, customers must pay for the security within four business days after the trade date or the transaction will be cancelled.

In contrast, in a margin account, a customer only has to deposit part of the cost of the security by settlement. The percentage that the customer has to deposit is determined by