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The margin or difference between the actual market value of a security and the value assessed by the lending side of a transaction.


1. The reduction of value to securities used as collateral in a margin loan. That is, when one places securities as collateral, the brokerage making the loan treats them as being worth less than they actually are, so as to give itself a cushion in case its market price decreases.

2. The bid-ask spread at which a market maker buys and sells securities. It is called a haircut because it is a thin spread.


A deduction in the market value of securities being held by brokerage and investment banking firms as part of net worth for calculating their net capital. The size of a haircut varies with the particular type of security held.


A haircut, in the financial industry, is a percentage discount that's applied informally to the market value of a stock or the face value of a bond in an attempt to account for the risk of loss that the investment poses.

So, for example, a stock with a market value of $30 may get a haircut of 20%, to $24, when an analyst or money manager tries to anticipate what is likely to happen to the price.

Similarly, when a broker-dealer calculates its net capital to meet the 15:1 ratio of debt to liquid capital permissible under Securities and Exchange Commission (SEC) rules, it typically gives volatile securities in its portfolio a haircut to reduce the potential for being in violation.

The only securities that consistently escape a haircut are US government bonds because they are considered free of default risk.

References in periodicals archive ?
So dust off your tuxedo and book a hair appointment at Company Haircutters.
Mowgli Haircutters are a successful, hair salon in the heart of affluent Primrose Hill, serving the well- heeled set of music execs, film business people and ladies who lunch.
THIS WEEK: Sandra Kershaw, 23, went to Exhibition Haircutters in Barrow, Cumbria (01229-433217)
And I was able to work my way up from brushing up hair on the salon floor, to running Company Haircutters, one of the most successful hairdressers in Belfast.
One of the best haircutters in the city was called in to do the pubic hair," someone leaned over and whispered in my ear.
Other types of industries that would be subject to the tax are accountants, architects, lawyers, public relation professionals, dry cleaners, florists, cosmotologists, haircutters, even coin-operated laundries.
Julie's role is to rouse volunteer haircutters before dawn to schlep out to remote locations to cut hair on behalf of CAF.
Instead, she trained at Maroon Haircutters Salon in Cowbridge in the Vale of V Glamorgan, where the family said staff had been "supportive from the day of Amy's diagnosis" on her 21st birthday in August 2012.
Happy birthday to one of the San Fernando Valley's classiest veteran haircutters -- Carmin Casciano, who turns 100 today.
com, Algoma's Watertower Inn, The Flower Shed, The Flower Jug, First Choice Haircutters and Del Laboratories, Canadian Businesss and Ganong.
Pic unfolds during a 24-hour period in which Calvin (Ice Cube) will decide whether or not to sell the community landmark to a loan shark who wants to turn it into a strip joint, thereby throwing the barbershop's improbably large family of haircutters into the street.
Tenants include Exit Realty, Los Vega Mexican Restaurant, Champions Liquor, Imperial China Cafe, TGF Haircutters, Subway, Ace Cash Express, Kim's Nails, Postal Plus and Ken Stewart Nationwide.