House Maintenance Requirement

AAA

DEFINITION of 'House Maintenance Requirement'

The minimum amount of equity that an account holder must maintain in a margin account, as determined by the brokerage firm. The house maintenance requirement will often be higher than the maintenance margin set out by the Federal Reserve's Regulation T, which stipulates that an equity level of at least 25% must be maintained, and it can also be different for different account holders within the firm.

INVESTOPEDIA EXPLAINS 'House Maintenance Requirement'

Although Reg T states that the lowest the maintenance margin can be is 25%, some brokerage firms may not want to take on the greater risk associated with allowing the lowest possible maintenance margin. To offset the risk, firms will raise the maintenance margin - to levels as high as 40% on some accounts - to limit the size of potential losses if a margin account holder is unable to meet a margin call. If the account holder is unable to meet the margin call, the assets in the account will be liquidated.

RELATED TERMS
  1. Call Money Rate

    The interest rate on a type of short-term loan that banks give ...
  2. Margin

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

    A broker's demand on an investor using margin to deposit additional ...
  4. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin ...
  5. Initial Margin

    The percentage of the purchase price of securities (that can ...
  6. Equity

    1. A stock or any other security representing an ownership interest. ...
RELATED FAQS
  1. What does it mean when the shares in my account have been liquidated?

    An account liquidation occurs when the holdings of an account are sold off by the firm in which the account was created. ... Read Full Answer >>
  2. What is a margin account?

    A margin account is an account offered by brokerages that allows investors to borrow money to buy securities. An investor ... Read Full Answer >>
  3. What are the minimum margin requirements for a short sale account?

    In a short sale transaction, the investor borrows shares and sells them on the market in the hope that the share price will ... Read Full Answer >>
  4. What is each party's role in a reverse repurchase agreement?

    There are two principal parties in a reverse repurchase agreement. The first party, often called the seller, is offering ... Read Full Answer >>
  5. What are some of the major regulatory agencies responsible for overseeing financial ...

    There are a number of agencies assigned to regulate and oversee financial institutions and financial markets, including the ... Read Full Answer >>
  6. What risks does the dealer (lender) in a reverse repurchase agreement take on?

    In a conventional repurchase agreement, or repo, the dealer is the borrower and takes on similar risks to borrowers in other ... Read Full Answer >>
Related Articles
  1. Options & Futures

    Margin Trading

    Find out what margin is, how margin calls work, the advantages of leverage and why using margin can be risky.
  2. Economics

    Greece Isn’t The Only Problem U.S. Stocks Face

    Both stocks and bonds fell last week, due to several factors dampening investor sentiment. The most obvious one is the evolving situation in Greece.
  3. Entrepreneurship

    Fed Raising Rates Affects Startup Funding

    With interest rates having nowhere else to go but up, the Fed’s impending interest rate raise will likely begin to reverse the flow of startup funding.
  4. Investing Basics

    Calculating Unlevered Free Cash Flow

    Unlevered free cash flow (UFCF) is the free cash flow of a business before interest payments.
  5. Fundamental Analysis

    Calculating Degree of Financial Leverage

    Degree of financial leverage (DFL) is a metric that measures the sensitivity of a company’s operating income due to changes in its capital structure.
  6. Economics

    Explaining the Reserve Ratio

    Reserve ratio is the amount of cash a bank must keep in its bank vaults or deposit into a central, governing bank.
  7. Investing Basics

    Netflix's Billion-Dollar Content Licensing Budget

    Understand how Netflix selects the TV shows and movies it streams to its subscribers, and learn how it finances those licensing deals.
  8. Economics

    What The Fed Needs To Consider Before A Rate Hike

    Everyone, from colleagues to clients, has some interpretation of when and if the Fed should raise short-term rates and start to normalize monetary policy.
  9. Fundamental Analysis

    Financial Analysis: Solvency Vs. Liquidity Ratios

    Solvency and liquidity are equally important for a company's financial health. A number of financial ratios are used to measure a company’s liquidity and solvency, and an investor should use ...
  10. Economics

    What Do the Federal Reserve Banks Do?

    These 12 regional banks are involved with four general tasks: formulate monetary policy, supervise financial institutions, facilitate government policy and provide payment services.

You May Also Like

Hot Definitions
  1. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  2. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  3. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
  4. Current Account Deficit

    A measurement of a country’s trade in which the value of goods and services it imports exceeds the value of goods and services ...
  5. International Monetary Fund - IMF

    An international organization created for the purpose of: 1. Promoting global monetary and exchange stability. 2. Facilitating ...
  6. Risk-Return Tradeoff

    The principle that potential return rises with an increase in risk. Low levels of uncertainty (low-risk) are associated with ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!