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Strategies & Market Trends : Roger's 1998 Short Picks -- Ignore unavailable to you. Want to Upgrade?

To: oexwa who wrote (15928)	12/2/1998 10:03:00 PM
From: Rajiv	Read Replies (2) \| Respond to of 18691

Wall Street Firms Continue to Raise Margin Requirements on Net Stocks Dow Jones Newswires U.S. Clearing Corp., which clears trades for 350 brokerage firms, Tuesday raised margin maintenance requirements on some Internet stocks to as high as 50% to 65% from 35%, depending on the stock. A source added that it involved 20 stocks. The move came as many of the leading online brokers -- and at least one large clearing firm have raised the margin maintenance requirements on many Internet stock investments. Over the past several weeks, Toronto Dominion Bank's Waterhouse Securities unit, Ameritrade Holdings Corp. and Salomon Smith Barney have all raised the amount of equity that must be maintained in margin accounts that invest in many of the Web sector's recent highfliers. Given the steep ups and downs that have roiled the Internet sector in recent weeks brokerage firms are concerned that the value of many of these stocks could drop very steeply and very quickly -- which could bring on margin calls. By raising margin maintenance requirements, the firms are trying to ensure that investors who buy on margin have more assets to protect them in the case of a margin call -- which reduces the likelihood that the brokerage would have to liquidate their investments. <Picture: [Go]>Internet-Firm Valuations Prove a Challenge Amid Fluctuations (Nov. 30) For its part, DLJ Direct, a unit of Donaldson, Lufkin & Jenrette Inc., has had higher margin maintenance requirements on some Internet stocks for some time and has added to this list in recent weeks. And ETrade Group Inc. is "certainly investigating what is going on with the market in general and particularly with volatile stocks," which could include Internet names, a spokeswoman said. ETrade, she added, is in the process of evaluating its policy. It was unclear Tuesday exactly how many brokerage and clearing firms had actually changed their margin requirements. The National Association of Securities Dealers and the New York Stock Exchange require investors who buy stocks on margin to maintain equity -- which is market value plus cash minus debt -- that is equal to at least 25% of an account's holdings. Most brokerage firms set this "maintenance requirement" at a higher level, usually 30%. These requirements come on top of a rule set by the Federal Reserve prohibiting investors from borrowing more than 50% of a stock's value when making an initial purchase on margin.