Margin
Margin accounts allow for increased flexibility when investing. They provide the investor with buying power to purchase shares without necessarily having all of the funds available at the start.
This "buying power" (or loan value technically), is based on the value and quality of the investments in the account. The amount is calculated from the market value of the securities either already in the account or to be acquired. Thus, the loan value can fluctuate depending on the type of security as well as the market value of the security.
Type of security
|
% Loan Value |
| Canadian and American equities* |
|
| $5 and over AND option eligible |
70% |
| $2 and over |
50% |
| $2 and over with sector concentration in the account** |
40 to 50% |
| Under $2 |
No loan value |
| Canadian and American options |
No loan value |
| Mutual funds |
50% |
| Fixed-income securities |
|
Corporate bonds and debentures
|
90% |
| Municipal bonds |
95% |
| Provincial bonds |
95% |
| Commercial paper & bankers acceptances |
90% |
| Canada bonds |
96% |
| T-bills (CDN or US) maturing in > 3 years |
96% |
| T-bills (CDN or US) maturing in < 3 years |
99% |
| * |
Except shares trading on the TSX Venture Exchange and on over-the-counter
markets, which are not marginable. Disnat reserves the right to
reduce or remove the amount of margin that can be attributed to
any particular security. |
| ** |
Stock, or group of stock of the same sector, representing 60%
or more of the value of the portfolio. |
Short Sales
Short selling involves selling a security that you do not own. Short sell orders can only be entered only in margin-short accounts. The rules governing these transactions vary and are specific to each North American stock exchange:
- TSX and TSX Venture: short sales can be executed at the price of the prior trade.
- NYSE: short sales can be executed only on an up-tick (the last trade in a security must take place at a price higher than the previous trade).
- NASDAQ and OTCBB: short sales can be executed if the bid price is higher than the previous bid price.
| Minimum Margin Required |
| Stock Value |
Minimum margin required as % of the market value |
| $5 and over AND option eligible |
130% |
| $2 and over * |
150% |
| Between $1.50 and $1.99 * |
$3 per share |
| Between $0.25 and $1.49 * |
200% |
| Under $0.25 * |
100% plus $0.25 per share |
* Short sales are not accepted for stocks below $3, however existing short positions may be held if they decline below $3. |
|
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