DD Support Board and Research Team

[BigBake1]

Minimum $1.. Where did that bullshit come from?… Give me a link.. I want proof…

Not everything is just provide a “link”, one must know what they are looking for to properly search for the answer. The minimum of $1 for meeting the SBP for example is NOT based on a policy established by the DTCC. The DTCC does not get to set its own policies without complying with written laws

First let us establish what the DTCC is and is not, it is easy to get the “nots” out of the way. The DTCC is not a regulatory Agency, it is not an SRO and it is not a Government agency. However the DTCC is a private corporation, it is a member of the Federal Reserve System and a registered clearing agency with the SEC. So therefore it doesn’t get to write it’s own rules and policies regarding how it operates, the rules must comply with both the Federal Reserve Board and the SEC.

All “borrow and loan” programs are governed by the Federal Reserve Board, this is all spelled out in the CFR (Code of Federal Regulations). Because the DTCC is not a Broker Dealer and is in fact like a bank it falls under Reg U. “Credit by Banks and Persons other than Brokers or Dealers for the Purpose of Purchasing or Carrying Margin Stock”. Such Hypothecated loans fall under Regulation U, which determines the requirements to extend such loans, more specifically loans to Broker Dealers, are under CFR 221.5 this includes such marginable stock.

The collateral received for securities loaned is generally cash and is adjusted daily through the National Securities Clearing Corporation's ("NSCC") net settlement process and is classified as payables to broker-dealers and clearing organizations in the unaudited statement of financial condition. Securities loaned generally represent client securities that can be hypothecated under standard margin loan agreements. Securities loaned are included in payables to broker-dealers and clearing organizations in the unaudited statement of financial condition. In May 2013, the Company ended its participation in the NSCC Stock Borrow Program and all pledged collateral was returned to the Company.

The Federal Reserve Board used to publish a list of such marginable securities in a list up until 1998. The Federal Reserve Board decided at that time to place the obligation of marginable securities based upon the minimum exchange listing requirements of the NASDAQ. The minimum price is $1…. That is where the whole $1 minimum requirement comes from, the NASDAQ minimum bid price listing requirement:

The Bid Price Requirement
The bid price requirement establishes a minimum bid price for issues listed on Nasdaq. The Nasdaq Rules provide that, for an issue to be eligible for continued listing on Nasdaq, the minimum bid price per share shall be $1. An issue is subject to delisting from Nasdaq, as described in the Rule 5800 Series if its bid price falls below $1.

Now that is the minimum margin price established by law, however as we all know most brokers do not extend margin for any security that is less than $3-$4. Why? Because they have established their own risk policies, they can lower their risk but they cannot increase their risk beyond Federal Laws.