Excess Equity (EE)

Definition - What does Excess Equity (EE) mean?

Excess Equity (EE) is the value of a margin account’s equity in excess of Reg. T.

Testopedia explains Excess Equity (EE)

When a customer opens a margin account he is required to meet the initial Reg T requirement for the trade. The formula for determining a customer's equity in the account is:
Market Value-Debit Balance=Equity

Ex: 20,000-10,000=10,000

Excess equity is created when the securities in the account increase in value to such a point that there is equity in the account in excess of 50% of the market value (Reg T).

Ex: 24,000-10,000=14,000

50% of the current market value is 12,000. Equity is 14,000. Therefore, there is 2,000 in excess equity in the customer's account (14,000-12,000=2,000)

Connect with us

Testopedia on Linkedin
Testopedia on Linkedin
Tweat www.testopedia.com
"Testopedia" on Twitter


'@Testopedia'
Sign up for Testopedia's Free Newsletter!