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The margin or difference between the actual market value of a security and the value assessed by the lending side of a transaction.


1. The reduction of value to securities used as collateral in a margin loan. That is, when one places securities as collateral, the brokerage making the loan treats them as being worth less than they actually are, so as to give itself a cushion in case its market price decreases.

2. The bid-ask spread at which a market maker buys and sells securities. It is called a haircut because it is a thin spread.


A deduction in the market value of securities being held by brokerage and investment banking firms as part of net worth for calculating their net capital. The size of a haircut varies with the particular type of security held.


A haircut, in the financial industry, is a percentage discount that's applied informally to the market value of a stock or the face value of a bond in an attempt to account for the risk of loss that the investment poses.

So, for example, a stock with a market value of $30 may get a haircut of 20%, to $24, when an analyst or money manager tries to anticipate what is likely to happen to the price.

Similarly, when a broker-dealer calculates its net capital to meet the 15:1 ratio of debt to liquid capital permissible under Securities and Exchange Commission (SEC) rules, it typically gives volatile securities in its portfolio a haircut to reduce the potential for being in violation.

The only securities that consistently escape a haircut are US government bonds because they are considered free of default risk.

References in periodicals archive ?
Sport Clips donates free haircut coupons for those who donate during September
The haircut story is as true as Elvis bumping into me in Temple Bar.
It's like the Mayberry of Los Angeles here,'' Bob Mehlhoff said Friday afternoon as he was in Mayer's chair getting a haircut.
To date, the Share-A-Haircut program has reached more than 925,000 children with haircut certificate donations, valued at $16.
BOBBY Charlton has finally admitted that his old haircut looked ridiculous.
RESEDA - As 5-year-old Ian Hayes fidgeted under a barber's clippers during his back-to-school haircut Monday, his mother, Kim Hayes, fretted about dropping her son off for his first day of school.
The combination of high-quality haircuts and a high-energy sport-themed environment has produced one of the franchise industry's fastest growing chains.
A fresh take on haircare services, featuring the "MVP Experience" that includes a precision haircut, massaging shampoo, hot steamed towel treatment, and neck and shoulder massage
GEORGETOWN, Texas -- You don't have to be in the active military to know the value of a great haircut.
GEORGETOWN, Texas, June 6, 2015 /PRNewswire/ -- Sport Clips Haircuts, the nation's leading men's and boys' hair care franchise, is expanding in the Northeast with emphasis on the greater Buffalo area.
Among those getting haircuts was a beaming Miles Levin, who said he was glad to help in the fight against cancer, which many customers said had touched friends or family members.
April 23, 2015 /PRNewswire/ -- Hair Cuttery and the National Network to End Domestic Violence (NNEDV) are teaming up for Hair Cuttery's Share a Haircut program.