Excess Margin Deposit

AAA

DEFINITION of 'Excess Margin Deposit'

Funds deposited in a trading account beyond what is required to fund basic margin requirements. The total balance on the account equals excess margin deposits plus margin. Investors can typically open an account and start trading with only a percentage of the total security value deposited. This is called trading on margin.

INVESTOPEDIA EXPLAINS 'Excess Margin Deposit'

In the forex market, an excess margin deposit may arise due to a currency trade returning to profitability after the trader has pumped in additional margin because of an earlier margin deficiency. It can also arise through a currency trade becoming significantly profitable shortly after initiation.


Traders may withdraw excess margin deposits if they reach a significant level, since excess capital in margin accounts pays little or no interest. However, nominal amounts of excess margin deposits may be left in the trading account as a cushion against margin calls triggered by adverse price movements.

RELATED TERMS
  1. Buying On Margin

    The purchase of an asset by paying the margin and borrowing the ...
  2. Forex - FX

    The market in which currencies are traded. The forex market is ...
  3. Leverage

    1. The use of various financial instruments or borrowed capital, ...
  4. Margin

    1. Borrowed money that is used to purchase securities. This practice ...
  5. Margin Call

    A broker's demand on an investor using margin to deposit additional ...
  6. Ceded Reinsurance Leverage

    The ratio of ceded insurance balances to policyholders’ surplus. ...
Related Articles
  1. Credit & Loans

    Mortgages: Fixed-Rate Versus Adjustable-Rate

  2. thinkstock|istock
    Options & Futures

    A Primer On The Forex Market

  3. Investing Basics

    7 Investing Mistakes And How To Avoid ...

  4. Options & Futures

    Getting Started In Forex

Hot Definitions
  1. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  2. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  3. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  4. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  5. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  6. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
Trading Center