Which regulation governs credit provided by brokers and dealers?

Regulation T is the correct regulation governing credit provided by brokers and dealers. It establishes the framework for the extension of credit in securities transactions and dictates the timing and amount of credit that brokers can offer their clients. Specifically, it sets the initial margin requirements for buying securities on margin, which means that it determines how much of the purchase price must be deposited by the investor while the remainder can be financed through credit from the broker.

Understanding Regulation T is crucial for both brokers and borrowers, as it ensures that parties are managing risk appropriately and maintaining market stability. This regulation plays a vital role in protecting investors and ensuring that they do not overextend themselves financially by borrowing too much against their investments.

The other regulations mentioned have different focuses: Regulation U deals with the use of credit by banks, Regulation R pertains to certain exemptions from broker-dealer registration for banks, and Regulation W governs transactions between banks and their affiliates, which is unrelated to the direct provision of credit by brokers and dealers in the context of securities.