The Margin Eligibility Modernization Act requires the Federal Reserve to update its rules governing which stocks can be used as collateral for margin loans. Specifically, it directs the Federal Reserve to expand the definition of "OTC margin stock" to include over-the-counter traded equity securities that have an active, ready market, bringing more stocks into eligibility for margin trading. The Federal Reserve must issue this updated rule within 90 days of the law's enactment, and if it fails to do so, the expanded definition automatically takes effect anyway. This change primarily affects brokerage firms and investors who use margin accounts to trade stocks. The legislation also requires the Federal Reserve to report back to Congress within five years on how much credit has been extended under the new rule and whether it poses any risks to the financial system.