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  • What Is A Margin Account

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    Suraiya Binte Azad
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    A margin account allows investors to borrow money from a brokerage to buy securities. The investor puts down an initial margin, usually 50% of the purchase price, and borrows the remaining amount from the broker. The broker uses the purchased securities as collateral and charges interest to the investor for borrowing the money. A maintenance margin is the minimum amount of equity, usually 25% of the securities' value, that must be maintained in the account. If the equity drops below this level, the broker will issue a margin call requiring the investor to deposit more cash or securities to meet the maintenance requirement.

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    What is a Margin Account

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    A margin account allows investors to borrow money from a brokerage to buy securities. The investor puts down an initial margin, usually 50% of the purchase price, and borrows the remaining amount from the broker. The broker uses the purchased securities as collateral and charges interest to the investor for borrowing the money. A maintenance margin is the minimum amount of equity, usually 25% of the securities' value, that must be maintained in the account. If the equity drops below this level, the broker will issue a margin call requiring the investor to deposit more cash or securities to meet the maintenance requirement.

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    13 views1 page

    What Is A Margin Account

    Uploaded by

    Suraiya Binte Azad
    A margin account allows investors to borrow money from a brokerage to buy securities. The investor puts down an initial margin, usually 50% of the purchase price, and borrows the remaining amount from the broker. The broker uses the purchased securities as collateral and charges interest to the investor for borrowing the money. A maintenance margin is the minimum amount of equity, usually 25% of the securities' value, that must be maintained in the account. If the equity drops below this level, the broker will issue a margin call requiring the investor to deposit more cash or securities to meet the maintenance requirement.

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    What is a margin account? A margin account is an account offered by brokerages that allows investors to borrow money to buy securities.

    An investor might put down 50% of the value of a purchase and borrow the rest from the broker. The broker charges the investor interest for the right to borrow money and uses the securities as collateral.

    What Does Initial Margin Mean? The percentage of the purchase price of securities (that can be purchased on margin) that the investor must pay for with his or her own cash or marginable securities. What Does Maintenance Margin Mean? The minimum amount of equity that must be maintained in a margin account. In the context of the NYSE and NASD, after an investor has bought securities on margin, the minimum required level of margin is 25% of the total market value of the securities in the margin account. Keep in mind that this level is a minimum, and many brokerages have higher maintenance requirements of 30-40%

    margin call
    Definition
    A call from a broker to a customer (called a maintenance margin call) or from a clearinghouse to a clearing member (called a variation margin call) demanding the deposit of cash or marginable securities to satisfy the Regulation T requirements and the house maintenance requirement for the purchase or short sale of securities or to cover anadverse price movement. also called federal margin call or Reg. T Call (for NASD requirements) or house call (for brokerage requirements).

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