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Technology Stocks : VALENCE TECHNOLOGY (VLNC) -- Ignore unavailable to you. Want to Upgrade?

To: Greg McDaniel who wrote (14661)	9/19/1999 9:51:00 AM
From: Zeev Hed	Read Replies (2) \| Respond to of 27311

Greg, I don't think we disagree, but most brokerage will not allow holders of VLNC stock to be marginable when the stock is under $5, and thus it removes this stock from the "lendable" pool, since, in principle, non marginable equity is moved into cash accounts (brokers can lend only equity that are in margin accounts, I believe). Zeev

To: Greg McDaniel who wrote (14661)	9/19/1999 5:51:00 PM
From: I. N. Vester	Respond to of 27311

$5 is a Fed limit. You guys are confusing buying power and maintance. Margin buying power is mandated by the Fed. Maintance requirements do have a Fed limit, but most brokerages set their own for low priced stocks. As far as as i know the only Fed limit is the 30% limit, and no special maintance rules for low priced stocks e.g. have to keep $2.50 or $3.00 or $3.50 equity - these are broker's house rules. btw the brokers can change their rules at any time without notice which is one of the risks of using margin. Both Fidelity and Datek changed their policy on VLNC with no warning recently. When a stock drops below $5 you cannot borrow against it. This is a Fed rule, not a brokerage rule. There is no Fed rule that it has to remain above $5 for any period to regain buying power. If it closes at $5 or above then you have buying power the next day. The rules on maintance for low priced stock are up to the broker. Even tho a stock below $5 is no longer 'marginable' i.e. cannot be used as collateral to buy (again this is a Fed regulation), it still has collateral value against any outstanding margin debt which already existed when the price dropped below $5. The Fed rule might not even be visable if you have a stock which falls below $5 and higher priced holdings and already margined to the limit of the $5 stock. That's because your buying power won't decrease if you have already borrowed all you could against the vaule of the < $5 stock before it went below $5.