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Known as "Reg T" by hip securities-industry insiders, the Federal Reserve Board's Regulation T sets the amount of margin that broker-dealers can lend to investors for the purchase of securities. Created in 1934 as a response to the rampant overextension of credit in the 1920s which factored in the 1929 stock market crash, the margin requirement was imposed to protect unsophisticated investors from themselves.
Reg T is currently set at 50%.

Example: If an investor purchases $10,000 worth of securities on margin, he must supply $5,000 in cash.
Here's the twist: If the investor loses money, the value of the securities purchased goes down, but the amount of the loan does not. So: If $10,000 is purchased on margin, and the value of the securities goes down to $8,000, the investor must meet the Reg T requirement by depositing another $1,000.

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