Maintenance Margin

Maintenance margin

For derivative contracts, when the margin drops below the maintenance margin, the investor gets a margin call. The investor must post margin to the initial margin (which is higher than the maintence) or the contract will be liquididated.

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Maintenance Margin

The money or securities an investor keeps in a margin account in order to be able to borrow from a brokerage for short sales or other purposes. The maintenance is kept as collateral until the brokerage calls the margin and the client pays back what is owed. FINRA requires that the maintenance kept must be at least 25% of the amount borrowed, while some brokerages require maintenances of up to 50%. See also: Restricted account.

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Maintenance Margin

What Does Maintenance Margin Mean?

The minimum amount of equity that must be maintained in a

margin account. According to the NYSE and NASD, once an investor buys securities on margin, the minimum required level of margin is 25% of the total market value of the securities in the margin account. One should keep in mind that this level is a minimum, and many brokerages have higher “house” maintenance requirements of 30 to 40%. Also referred to as minimum maintenance or maintenance requirement.

Investopedia explains Maintenance Margin

As governed by the Federal Reserve's Regulation T, when a trader buys on margin, key minimum margin requirements must be maintained throughout the life of the trade. First, a broker cannot extend any credit to accounts with less than $2,000 in cash (or securities). Second, the initial margin of 50% is required for each initial margin trade. Third, the maintenance margin states that an equity level of at least 25% must be maintained. The investor will receive a margin call if the value of securities falls below the maintenance margin.

Related Terms:
• Leverage
• Margin
• Margin Account
• Margin Call
• Regulation T—Reg T