What is Regulation T (Reg T)?

Regulation T, sometimes referred to as Reg T, is a set of rules that was first implemented by the Federal Reserve Board in 1974 to reduce risk in securities transactions. Regulation T enables securities dealers to extend credit to their clients, while its main functionality is to control the margin requirements and stocks bought on margin by investors. According to Reg T, traders are able to receive up to 50% of a trade's value via margin from their broker. This mechanism was put into place to control leverage trading risk and limit the total buying power of investors.