Some securities, such as penny stocks and IPOs, are prohibited from being purchased on margin or for serving as margin for other purchases.

Stocks and other securities that are too volatile to serve as margin collateral - or to be purchased on margin - are called Non-marginable Securities. The Federal Reserve Board has defined certain criteria for determining which securities are non-marginable, and brokers often have their own house rules for traders.

These rules exist to prevent unstable securities from serving as collateral and from triggering margin calls frequently, which can destabilize markets or waste time and money for brokers. Examples of non-marginable securities are penny stocks, IPOs, and bulletin board securities.