Margin call

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Related to margin calls: Maintenance margin, Maintenance margin requirement

Margin call

A demand for additional funds because of adverse price movement. Maintenance margin requirement, security deposit maintenance.

Margin Call

An order by a brokerage for an account holder to deposit more cash or securities into a margin account when the value of the cash and securities currently in it falls below some defined percentage. Every margin account has a maintenance margin requirement, which is money or securities an investor must keep in his/her margin account in order to be able to borrow from the brokerage. FINRA requires that the maintenance margin must be at least 25% of the amount borrowed, while some brokerages require a maintenance margin of up to 50%. If the maintenance margin falls below this, the account may be subject to a margin call. If the account holder is unable to make the necessary deposit, he/she must close out enough positions in order to make the deposit, or risk the account becoming blocked.

margin call

A call for additional funds or securities in a margin account either because the value of equity in the account has fallen below a required minimum (also termed a maintenance call) or because additional securities have been purchased (or sold short).

Margin call.

To protect the margin loans they make, brokers issue a margin call if your equity in your margin account falls below the required maintenance level of at least 25%.

If you get a margin call, you must deposit additional cash or securities to meet the call, bringing the balance of the account back up to the required level.

If you don't meet the call, securities in your account may be sold, and your broker repaid in full. For example, if you buy 1,000 shares on margin when they are selling at $10 a share, and the price falls to $7 a share, your equity would be $2,000 ($7,000 market value minus $5,000 loan is $2,000).

That's 28.6% of the market value. If your brokerage firm has a maintenance requirement of 30%, you would receive a margin call to bring your equity back to the required level -- in this case $2,100, which is 30% of $7,000.

You might also get a margin call if you trade futures contracts and the value of your account drops below the required maintenance level. However, margin requirements for futures are different than for stock.

References in periodicals archive ?
Goldstone continued, "To satisfy unmet margin calls at March 6, 2008, we entered into an Override Agreement with five of our remaining reverse repurchase agreement and auction swap agreement lenders in which Thornburg Mortgage was granted a 364-day reprieve from further margin calls and a reduction of margin requirements.
If after that time the company does not fully comply with the provisions of the reverse repurchase, securities lending and auction swap agreements the counterparties will again have the right to invoke margin calls and exercise all of their other rights under the reverse repurchase, securities lending and auction swap agreements.
This decline in value triggered margin calls throughout the marketplace, including for MuniMae, which borrows from Merrill Lynch against the value of its tax-exempt bond holdings.
Having the securities bought or sold at prices less favorable than prevailing market prices then caused further margin calls, resulting in a death spiral for the account(s).
A 25 per cent drop on the Dubai index from December 1 through December 17 triggered a lot of margin calls by brokers, which aggravated the selling pressure on the UAE markets.
Billionaire investor Alexander Vik said margin calls by Deutsche Bank as markets tanked in the onset of the credit crisis in October 2008 caused him so much stress that he was treated in hospital.
3% yesterday, approaching the alert line of 140% for triggering margin calls.
The operations of the company are in order and no margin calls have been triggered against the stock," it said in a statement.
Given the growth and complexity of the derivatives collateral management process, it is imperative we provide clients with a clear, real-time window into reviewing and approving their collateral agreements, margin calls and settlements.
Prime Minister Essam Sharaf on Sunday approved changing rules to the country's Capital Markets Law to ease margin calls by brokerages, to limit volatility when the bourse opens.
Ashley, FX dealer Margin calls "Hopefully you won't encounter these, but it is your responsibility to monitor your positions, so never leave it to a spread betting firm to liquidate your position.
97pc, a seventh successive loss, as panicked investors sold amid margin calls on declining share portfolios and fears of a global downturn.