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As mentioned in Understanding Margin Accounts, when you purchase stock using a margin account, you can pay a portion of the purchase price and your broker lends you the difference. You pay interest on the broker's loan and it holds the security as collateral. Any income or interest earned in your account may be used to help offset the cost of borrowing.
The portion of the purchase price that you pay depends on the security. Here's what you need to know about eligible securities and applicable margin as an RBC Direct Investing client:
| Security | Margin Required | |
| Equities | Long | Short |
| CDN Eligible for reduced margin | 30% | 150% |
| All other eligible CDN Securities($5.00 and over) | 50% | 150% |
| U.S. securities eligible for reduced margin | 30% | 150% |
| All other U.S. securities($5.00 and over) | 50% | 150% |
| Other Equities | ||
| $3.00 - $4.99 | 75% | 175%* |
| $2.99 and under | 100% | Not eligible |
|
IPOs listed on TSE/NYSE/ME/AMEX/NASDAQ |
||
| $5.00 and over | 50% | |
| $3.00 - $4.99 | 75% | |
| $2.99 and under | 100% | |
|
Rights & Warrants |
||
| $5.00 and over | 50% | 150% |
| $3.00 - $4.99 | 75% | 175% |
| $2.99 and under | 100% | Not Eligible |
|
Mutual Funds |
||
| Trading above $2.00 | 50% | |
|
Money Market Funds |
||
| Money Market Funds Note: provided they are qualified by prospectus and filed in any province in Canada | 10% | |
| Gold & Silver | ||
| Gold & Silver | 25% | |
| Labour Sponsored Investment Funds (LSIF) | ||
| LSIF | 100% | |
| Debt | ||
| Coupon Bonds | 21% of market value | N/A |
| Corporate Bonds or Debentures(not convertible or in default) | 20% | 120% |
| Municipal Bonds | 20% | 120% |
| GICs | 20% | N/A |
| Provincial Bonds | 10% | 115% |
| Corporate Paper | 10% | 115% |
| Government of Canada Bonds | 7% | 115% |
| US Government Bonds | 7% | 115% |
| Government of Canada treasury bills | 7% | 115% |
| Convertible Bonds | (see table below) | N/A |
| Canada Savings Bond | 100% | |
| * Issues listed on TSXV or CSE are not marginable. |
Margin on Convertible Bonds
| Description | Margin Required |
| Priced above par | 50% |
| Priced at $50 to Par | 50% |
| Priced less than $50 | 100% |
Maximum Loan Values
| Description | Margin Required | Maximum Loan Value (CAD) |
| Security Eligible For Reduced Margin | 30% or less | $400,000 |
| Security Not Eligible For Reduced Margin ($5.00 and over) | 50% or more | $200,000 |
| Security Not Eligible For Reduced Margin ($3.00 - $4.99) | 75% or more | $100,000 |
| Total Maximum Loan Value | $2,500,000 |
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Any information, opinions or views provided in this document, including hyperlinks to the RBC Direct Investing Inc. website or the websites of its affiliates or third parties, are for your general information only, and are not intended to provide legal, investment, financial, accounting, tax or other professional advice. While information presented is believed to be factual and current, its accuracy is not guaranteed and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author(s) as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by RBC Direct Investing Inc. or its affiliates. You should consult with your advisor before taking any action based upon the information contained in this document.
Furthermore, the products, services and securities referred to in this publication are only available in Canada and other jurisdictions where they may be legally offered for sale. Information available on the RBC Direct Investing website is intended for access by residents of Canada only, and should not be accessed from any jurisdiction outside Canada.
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