Fed to Ease Costs of Borrowing for Securities Purchases
- Share via
WASHINGTON — The Federal Reserve Board on Thursday revamped rules to reduce investors’ costs of borrowing from banks and broker-dealers for securities purchases.
The proposal will increase the amount of stock in small-capitalized companies, known as margin securities, that can be used as collateral for loans to buy other stocks.
“It expands the pool of eligible collateral for investors that will allow them to borrow additional funds to make stock purchases if they own one of these newly eligible securities,” said Chris Bellini, a banking lawyer for the law firm of Gibson, Dunn & Crutcher and a former Fed aide.
Broker-dealers will be able to count all small-cap shares, listed by the National Assn. of Securities Dealers and not traded on an exchange, as 50% of collateral for securities purchases, Bellini said. Only 25% of the stocks now qualify.
In addition, investors will be able to use all debt securities, such as corporate bonds, as collateral for loans to buy securities.
The Fed’s action is part of a broader effort to simplify rules.
Inside the business of entertainment
The Wide Shot brings you news, analysis and insights on everything from streaming wars to production — and what it all means for the future.
You may occasionally receive promotional content from the Los Angeles Times.
