A margin call
is a demand by a broker that an investor deposits more cash to cover potential losses on trades.
Further downgrades left MF Global's credit rating at "junk" or speculative grade, indicating a company at risk of default, and triggered a new round of margin calls
. Amid growing concerns about the company's viability, MF Global experienced the brokerage firm equivalent of a "run on the bank": customers withdrew funds or closed accounts altogether, lenders cancelled credit lines, firms stopped trading with MF Global, and counterparties slowed or withheld payments to MF Global.
even in the best-case scenario, where the option expires leaving the seller to bank the premium, unexpected margin calls
can disrupt the strategy during its volatile lifespan.
Li Shiu-li, general manager of Jih Sun Securities Investment Consulting, advised investors to stay away from life-insurance shares and weak electronic shares, as they will face heavy pressure for margin calls
. Many stocks, such as China Life and Compal, witnessed surge in margin trading at high price levels.
The financers, including non- banking finance companies ( NBFCs) and stock brokers who arrange funds for promoters, offloaded huge volume of pledged stocks due to a margin call
sending share prices down, market analysts said.
"That resulted in some hefty margin calls
that had to be posted that night; there is no wiggle room in these futures exchanges," says Tim Emslie, research manager at Country Hedging, which works with hundreds of co-op elevators throughout the Midwest and Northwest.
Burns told the Wall Street Journal it was the first time since 1987 that he's faced a margin call
, and suggested, optimistically, that the market has reached bottom.
, both by brokers to investors and by exchanges to brokers, added to the pressure, with brokers saying they were unable to trade until they paid their margin calls
Some grain elevators, a key conduit for farmers to sell their grain to the market and hedge their risks through futures contracts, are having trouble raising enough working capital to cover their margin calls
as the price of grain keeps rising.
Relentless falls in the Mothers market and other Japanese venture firms-oriented stock markets made some investors face margin calls
, or requirements to deposit additional money into their margin trading accounts, brokers said.
It said: "As the prices of crude oil were at an all time high at above 55 US dollars per barrel, the company faced significant margin calls
on its open positions and did not have the resources to satisfy the margin calls
As WorldCom began to show signs of financial difficulty, the debtor's stockbroker sold his shares as they decreased in value to meet margin calls