Minimum Margin

Minimum Margin

The minimum amount in money or securities an investor must place with a broker in order to open a margin account. A margin account allows the investor to borrow from a brokerage to conduct short sales or for other purposes. The minimum margin is at least $2,000, which provides initial collateral for the first loans on the margin account. Some brokerages require higher minimum margins. See also: Maintenance margin.

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Minimum Margin

What Does Minimum Margin Mean?

The initial margin amount required to be deposited in a margin account before buying or selling short on margin. For example, the NYSE and the NASD require investors to deposit a minimum of $2,000 in cash or securities to open a margin account. One should keep in mind that this amount is only a minimum; some brokerages may require deposits over $2,000.

Investopedia explains Minimum Margin

When an investor buys on margin, there are different minimums that are governed by the Federal Reserve Board's Regulation T and that must be met throughout the life of a margin trade. The minimum margin, which states that a broker cannot extend any credit to accounts with less than $2,000 in cash (or securities), is the first requirement. Second, an initial margin of 50% of the market value of the trade is required for the trade. Third, the maintenance margin says that an investor must maintain equity of at least 25% or be hit with a margin call.

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