Minimum Margin

DEFINITION of 'Minimum Margin'

The initial amount required to be deposited in a margin account before trading on margin or selling short. For example, the NYSE and the NASD require investors to deposit a minimum of $2,000 in cash or securities to open a margin account. Keep in mind that this amount is only a minimum - some brokerages may require you to deposit more than $2,000.

BREAKING DOWN 'Minimum Margin'

When you buy on margin, there are key levels - as governed by the Federal Reserve Board's Regulation T - that must be maintained throughout the life of a trade. The minimum margin, which states that a broker can't extend any credit to accounts with less than $2,000 in cash (or securities) is the first requirement. Second, an initial margin of 50% is required for a trade to be entered. Third, the maintenance margin says that you must maintain equity of at least 25% or be hit with a margin call.

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RELATED FAQS
  1. What happens if I cannot pay a margin call?

    Minimum margin is the amount of funds that must be deposited with a broker by a margin account customer. With a margin account, ... Read Answer >>
  2. What is the difference between initial margin and maintenance margin?

    Learn the difference between an initial margin requirement and a maintenance margin requirement and how these affect an investor's ... Read Answer >>
  3. How is buying on margin regulated by the Securities and Exchange Commission (SEC)?

    Learn how FINRA and the Federal Reserve regulate margin account trading, and understand how pattern day trading can impact ... Read Answer >>
  4. How much can I borrow with a margin account?

    Understand the basics of margin accounts and buying on margin, including what amount investors can typically borrow for purchases ... Read Answer >>
  5. What does it mean when I get a maintenance margin call?

    Understand how maintenance margin calls work, and learn about how margin requirements are different for trading stock versus ... Read Answer >>
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    Find out why the Federal Reserve Board began regulating margin stock purchases in 1934 and why margin requirements do not ... Read Answer >>
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