What Is Regulation T? Margin, the Payment Period, Extensions, and the 90-Day Freeze
Updated October 2026 for T+1 settlement. First published April 2024.
Regulation T is the Federal Reserve Board's rule on credit that broker-dealers extend to customers to buy and carry securities. It's 12 CFR Part 220, and FINRA examines broker-dealers for compliance with it. Most of what an operations team handles under Regulation T comes down to two questions: how much the customer has to put up, and how fast the customer has to pay.
What Regulation T Sets, and What It Doesn't
Regulation T sets initial margin: the deposit a customer needs when a position is opened. For a margin equity security, that's 50 percent of current market value, or a higher exchange requirement where one applies (220.12). A short sale of a nonexempted equity security needs 150 percent of market value, which is the 100 percent of sale proceeds plus 50 percent.
Regulation T doesn't set maintenance margin, the equity a customer has to keep as prices move. That comes from FINRA Rule 4210, from exchange rules, and from each firm's house requirements, which are often higher. A call for more equity after a price drop is a maintenance call under those rules, not a Regulation T call.
The Payment Period After T+1
Regulation T doesn't count days on its own. It defines the "payment period" in 220.2 as the number of business days in the standard U.S. settlement cycle under SEC Rule 15c6-1, plus two business days. Since T+1 took effect on May 28, 2024, that's three business days. A purchase on Monday has to be paid for by Thursday.
The same clock runs in both main account types:
| Margin account (220.4) | Cash account (220.8) | |
|---|---|---|
| What's due | The initial margin deposit (a Regulation T call) | Full cash payment for the purchase |
| Deadline | One payment period after the deficiency was created or increased | One payment period after the trade |
| If it isn't met | The firm liquidates enough securities to meet the call or eliminate the deficiency | The firm cancels or liquidates the transaction |
| Small amounts | No action needed for a deficiency of $1,000 or less | The firm may disregard an unpaid amount up to $1,000 |
Extensions
A firm can ask its examining authority, which is FINRA for most broker-dealers, to extend a payment period. Regulation T allows it for "one or more limited periods" in exceptional circumstances, and the request has to be filed and acted on before the period runs out (220.4(c)(3)(ii) for margin calls, 220.8(d) for cash accounts). FINRA can refuse if it thinks the firm isn't acting in good faith or hasn't shown that the circumstances are exceptional. A firm that files extensions routinely for the same customers will hear about it in an exam.
The 90-Day Freeze
In a cash account, if a customer sells a security, or the firm delivers it to another broker-dealer, before the customer has paid for it in full, the account loses delayed-payment privileges for 90 calendar days (220.8(c)(1)). For those 90 days, the customer has to have the cash in the account before the firm buys anything. This is the free-riding rule, and how risky is your free ride covers how it plays out.
Two exceptions matter to operations teams:
- The freeze doesn't apply if full payment arrives within the payment period and the customer doesn't withdraw the sale proceeds first.
- It doesn't apply when the firm delivers the security to another broker-dealer for deposit in a cash account that holds enough funds to pay for it. The firm may rely on that broker-dealer's written statement, accepted in good faith. That statement is the Letter of Free Funds, and the Letter of Free Funds guide walks through when an executing broker needs one.
Where Firms Slip
- Counting the payment period from the old cycle. Procedures written before May 2024 may still say T+4. Under T+1, it's T+3.
- Treating a maintenance call as a Regulation T call. They have different sources, deadlines, and escalation paths, and the records should show which one was issued.
- Delivering DVP from a cash account with nothing on file. Without the written statement, a delivery before payment puts the customer in a 90-day freeze.
- Using extensions as a workflow. An extension is for exceptional circumstances. A pattern of them points to a process problem.
Loffa's Freefunds Verified Direct (FVD) handles the Letter of Free Funds exchange between executing brokers and the firms that hold the cash.