Maintenance Margin

AAA

DEFINITION of 'Maintenance Margin'

The minimum amount of equity that must be maintained in a margin account. In the context of the NYSE and FINRA, after an investor has bought securities on margin, the minimum required level of margin is 25% of the total market value of the securities in the margin account. Keep in mind that this level is a minimum, and many brokerages have higher maintenance requirements of 30-40%.

Also referred to as "minimum maintenance" or "maintenance requirement."

INVESTOPEDIA EXPLAINS 'Maintenance Margin'

As governed by the Federal Reserve's Regulation T, when a trader buys on margin, key levels must be maintained throughout the life of the trade. First off, a broker cannot extend any credit to accounts with less than $2,000 in cash (or securities). Second, the initial margin of 50% is required for a trade to be entered. Finally, the maintenance margin says that an equity level of at least 25% must be maintained. The investor will be hit with a margin call if the value of securities falls below the maintenance margin.

RELATED TERMS
  1. Federal Call

    A special type of margin call requiring a trader to deposit sufficient ...
  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. Margin Account

    A brokerage account in which the broker lends the customer cash ...
  5. Regulation T - Reg T

    The Federal Reserve Board regulation that governs customer cash ...
  6. Leverage

    1. The use of various financial instruments or borrowed capital, ...
RELATED FAQS
  1. How is buying on margin regulated by the Securities and Exchange Commission (SEC)?

    The Federal Reserve Board and the Financial Industry Regulatory Authority (FINRA) regulate buying on margin to a greater ... Read Full Answer >>
  2. Why is purchasing stocks on margin considered more risky than traditional investing?

    Buying on margin involves borrowing money from a broker to purchase stock. A margin account increases your purchasing power ... Read Full Answer >>
  3. What are my options when I get a margin call?

    The two options available to an investor when he receives a margin call are to deposit additional funds to his trading account ... Read Full Answer >>
  4. What does it mean when I get a maintenance margin call?

    A maintenance margin call is a requirement to place more money into an account that is trading on margin to hold the current ... Read Full Answer >>
  5. What is the difference between extensive margin and intensive margin in economics?

    Trading on margin is not commonly done in stock trading except by professional investors and institutional traders. However, ... Read Full Answer >>
  6. 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 >>
  7. My broker just sold securities out of my account without my permission. Is this legal?

    Your broker's actions are not legal unless he or she sold the securities under certain conditions. Let's look at the two ... Read Full Answer >>
  8. 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 >>
  9. I want to try short selling, but how can I sell something that I don't own?

    Money can be made in the equities markets without actually owning any shares, but this tactic is not for new investors. The ... Read Full Answer >>
  10. 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 >>
Related Articles
  1. Options & Futures

    Leveraged Investment Showdown

    Margin loans, futures and ETF options can all mean better returns, but which one should you pick?
  2. Options & Futures

    Spreading The Word About Portfolio Margin

    An underused opportunity provided in an SEC rule can enhance returns and lower risk for spread traders.
  3. Economics

    Will The US Economy Rebound In The 2nd Quarter?

    Most investors know that U.S. 1st quarter growth numbers aren’t pretty. Economic statistics have been missing expectations by the largest margin since 2009
  4. Economics

    The U.S. Economy May Be Stronger Than You Think

    While the economic performance in the U.S. broadly disappointed in the first quarter, temporary factors presented one-off events that depressed output.
  5. Investing

    REITs 101: How They're Regulated

    Here's everything you need to know about REITs in less than five minutes.
  6. Investing

    Pockets Of Value In The Stock Market

    U.S. stocks benefited from signs the Fed’s path toward higher interest rates, as well as from continued merger-and-acquisition activity on of low rates.
  7. Economics

    Why Is The Federal Reserve Independent?

    An overview of the independent status of the Federal Reserve and arguments for and against it.
  8. Brokers

    Private Equity's Returns Are Tempered By Its Risks

    Private equity firms adopt approaches to quickly hike up earnings and boost returns, but these investments come with big risks too.
  9. Credit & Loans

    The Pros & Cons Of Personal Loans vs. Credit Cards

    One is not like the other. We help you decide where to borrow money from.
  10. Investing

    The Implications Of Negative Interest Rates

    If financial theory is grounded in one principal, it would be the that individuals prefer consumption today over consumption in the more uncertain future.

You May Also Like

Hot Definitions
  1. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  2. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  3. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  4. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  5. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
Trading Center