Minimum Margin

Initial 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 initial margin requirement is kept as collateral until the brokerage calls the margin and the client pays back what is owed. FINRA requires that the initial margin requirement kept must be at least 25% of the amount borrowed, while some brokerages have initial margin requirements of up to 50%.

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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