Margin Call
A margin call is a demand from a broker or other financial institution to a trader or investor to deposit additional funds or securities into their margin account. This is done when the account value falls below the broker’s required minimum value. A margin call is a warning that the investor’s account value has dropped and is in danger of not meeting the minimum requirements. The margin call is an attempt to protect the broker from losses due to the investor’s inability to meet the minimum requirements.
History of Margin Calls
The concept of margin calls has been around since the early days of stock trading. In the early days, brokers would require investors to put up a certain amount of money as collateral for their trades. If the value of the stock dropped below the amount of the collateral, the broker would issue a margin call, demanding that the investor put up additional funds or securities to cover the difference. This was done to protect the broker from losses due to the investor’s inability to meet the minimum requirements.
Today, margin calls are still used by brokers and other financial institutions to protect themselves from losses due to the investor’s inability to meet the minimum requirements. However, the rules and regulations governing margin calls have changed over the years. In the United States, the Federal Reserve Board has set rules and regulations governing margin calls, including the amount of money that must be deposited in order to meet the minimum requirements.
Comparison Table
| Minimum Margin Requirement | Margin Call |
|---|---|
| 50% | 25% |
| 60% | 30% |
| 70% | 35% |
| 80% | 40% |
Summary
A margin call is a demand from a broker or other financial institution to a trader or investor to deposit additional funds or securities into their margin account. This is done when the account value falls below the broker’s required minimum value. The rules and regulations governing margin calls have changed over the years, and the Federal Reserve Board has set rules and regulations governing margin calls, including the amount of money that must be deposited in order to meet the minimum requirements. For more information on margin calls, you can visit the websites of the Federal Reserve Board, the Securities and Exchange Commission, and other financial institutions.
See Also
- Margin Account
- Margin Trading
- Margin Interest
- Margin Requirements
- Margin Balance
- Marginable Securities
- Maintenance Margin
- Initial Margin
- Excess Margin
- Margin Call Risk
