Preface xi About the Author xv CHAPTER 1 Cash Accounts 1 Sale of Securities 3 Paying for Securities by the Sale of Other Securities 3 Delivery against Payment 4 Employee Stock Options 6 Chapter One Questions 7 CHAPTER 2 Initial Federal Margin Requirements 9 Purchases 9 Sales 16 Meeting a Margin Call 17 Chapter Two Questions 19 CHAPTER 3 Initial and Minimum Maintenance Requirements 21 Initial Requirements 21 House Requirements 23 NYSE Minimum Maintenance Requirements 23 Chapter Three Questions 29 CHAPTER 4 The Special Memorandum Account 31 Customer's Account 35 Chapter Four Questions 42 CHAPTER 5 Short Sales 45 Covering Short Sales 51 NYSE Minimum Maintenance Requirements 52 Sample Transactions 53 Short Sale versus the Box or Short against the Box 55 Prime Broker 59 Chapter Five Questions 62 CHAPTER 6 Bonds 65 U.S. Government Securities 67 Zero-Coupon Government Obligations 67 Municipals 69 Nonconvertible Corporate Bonds 72 Chapter Six Questions 74 CHAPTER 7 Miscellaneous Categories 77 When-Issued and When-Distributed Transactions 77 Customer's Accounts 78 Marks to the Market 80 When-Distributed Securities 80 Segregation of Customers' Securities 80 Review of Customers' Accounts 81 Interest Charges 83 Margin on New Issues 85 Day Trades 85 Requirements for a Pattern Day Trader 86 Time and Tick 87 Chapter Seven Questions 89 CHAPTER 8 Options 91 Definitions 92 Additional Definitions Related to the Types of Options 93 Examples 95 Requirements for the Purchase and/or Sale of Options 100 Long-Term Equity Anticipation Securities 101 LEAPS 101 LEAPS Example 102 Bull Spread Call Debit 106 Bear Spread Call Credit 107 Bull Spread Put Credit 107 Bear Spread Put Debit 108 The American Style 108 The European Style 108 Other Types of Options 108 Index Options 108 Interest Rate Options 109 Additional Details Concerning Options 113 Chapter Eight Questions 114 CHAPTER 9 Portfolio Margining 121 Margin Deficiencies 125 Chapter 9 Questions 126 Eligible/Hedged/Unhedged Positions 126 Account Set-up 126 Unlisted Derivatives 126 Liquidations 127 APPENDIX A The Federal Reserve 129 APPENDIX B Customer Margin Account and SMA Sheets 137 APPENDIX C Answers to Chapter Questions 139 APPENDIX D Final Examination Questions 151 APPENDIX E Final Examination Answers 161 Glossary of Terms 169 Index 177
MICHAEL T. CURLEY has fifty years of experience in the field of finance, including fifteen years in the banking industry and fifteen years in the brokerage industry. He has attained experience as a manager of operations at Citibank, as a vice president of operations at both State Street and Hartford Trust Company of New York, and from work in the Division of Compliance, Finance, and Margin at the New York Stock Exchange. Since 1987, Curley has been a full-time financial trainer and consultant. He currently teaches at the New York Institute of Finance and at the Securities Operations Forum.