Security credit consists of loans for purchasing and carrying securities from private depository institutions to security brokers and dealers, as well as households' credit and debit balances with brokers and dealers.
Under the Securities Exchange Act of 1934, the Federal Reserve Board is authorized to regulate the use of credit for purchasing or carrying securities. The instruments making up this category are those subject to Regulation T, the Federal Reserve Board regulation covering the extension of credit to customers by securities brokers, dealers, and members of the national securities exchanges. This regulation establishes initial margin requirements and defines registered (eligible), unregistered (ineligible), and exempt securities. Not all loans for which securities are used as collateral are included in this instrument category; some of these loans are considered to be consumer credit or depository institution loans not elsewhere classified.
In the financial accounts, security credit is not considered a form of credit market borrowing or lending because it is an indirect form of credit.