Not all securities can be purchased on margin. NASDAQ and all exchange-listed securities are allowed, as are U.S. government and municipal bonds. Over-the-counter securities are allowed if they are listed on the Federal Reserve marginable securities list.
However, new issues have to be publicly traded at least 30 days before they can be purchased on margin. Mutual fund shares are not eligible for trading on margin, but they can be used as collateral on a loan after 30 days. Penny stocks are not eligible, nor are OTC stocks that have fewer than four market makers regularly submitting bids and offers, or that have fewer than 400,000 shares outstanding.
Remember that non-marginable securities do not add to your buying power.
Summary
Marginable and Non-Marginable Securities
Marginable securities: securities that can be purchased on margin
• Exchange-listed securities (including NASDAQ and NYSE securities)
• U.S. government securities
• Investment-grade bonds and debentures
• OTC securities that are listed on the Federal Re
