initial margin requirement


Also found in: Acronyms.

Initial margin requirement

When buying securities on margin, the proportion of the total market value of the securities that the investor must pay for in cash. The Security Exchange Act of 1934 gives the Board of Governors of the Federal Reserve the responsibility to set initial margin requirements, but individual brokerage firms are free to set higher requirements. In futures contracts, initial margin requirements are set by the exchange.

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%.

initial margin requirement

The minimum portion of a new security purchase that an investor must pay for in cash. For example, with an initial margin requirement of 60%, the most an investor can borrow is $2,000 on a $5,000 purchase. This requirement is determined by the Federal Reserve Board. Also called margin requirement.
References in periodicals archive ?
Furthermore, the framework developed by the Committee on Payment and Settlement Systems and the Technical Committee of the International Organization of Securities Commissions (CPSS-IOSCO, 2013) proposes exempting uncleared derivatives from initial margin requirements until 2019 for end-users with less than 3 trillion [euro] in notional value.
Indeed, the results are roughly in line with industry estimates, which have suggested that the initial margin requirements will amount to anywhere from 1 percent to 10 percent of the notional value of a single (one-way) swap contract.
The framework also allows for a broad array of eligible collateral to satisfy initial margin requirements, thus further reducing the liquidity impact.
For each of the expected-return models, conditional probabilities are negatively related to initial margin requirements.
TABLE 2 Initial margin requirements and stock price reversals, 1902-87 Percentage of observations in which stock index reversed Standard Initial margin deviation (percent) Observations of return E([R.
For exotic OTC derivative positions and smaller portfolios held by a majority of other end users, however, Rowady explains that the initial margin requirements will range from painful to the outright extinction of some types of trades.
PAA's margin balance including initial margin requirements totaled less than $70 million at June 30, 2008 and July 16, 2008.
He noted that, "these new listings permit approved portfolio margining customers to realize substantial savings on initial margin requirements for hedged positions utilizing broad based index futures.

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