Margin
What is Margin?
Margin is collateral or account equity required to support financed securities, derivatives, or other leveraged positions and protect a broker or clearing party from loss.
Account aggregation must not imply that excess equity at one broker automatically supports a call at another. Legal entities, account types, currencies, and collateral eligibility matter. Liquidity reporting should map which assets can actually be transferred or pledged within the required deadline.
Securities margin
In a margin account, a broker lends part of a purchase price using account assets as collateral. Initial margin governs opening exposure, while maintenance requirements govern continuing equity. House requirements can exceed regulatory minimums and can change. Interest accrues on the loan, and securities may be available for lending according to the account agreement.
Derivatives margin
Futures margin is generally a performance bond rather than a down payment on ownership. Positions are marked to market and variation margin transfers gains and losses, often daily or intraday. Options, swaps, and centrally cleared products use product-specific initial and variation methodologies. Similar words therefore describe different legal and cash-flow arrangements across instruments.
Margin calls and liquidation
If account equity falls below requirements, the investor may need to add cash or collateral promptly. The broker or clearing member can have rights to liquidate positions without waiting for consent and may choose what to sell. Liquidation can occur at poor prices, realize tax consequences, and still leave a deficit owed by the client.
Example
An investor buys $100,000 of shares using $50,000 cash and $50,000 borrowed. A 30% market decline leaves $70,000 of assets and a $50,000 loan, so equity falls to $20,000 before interest. The asset lost 30%, but investor equity lost 60%. A higher maintenance requirement can trigger sales before the asset reaches the investor's expected recovery.
Practical controls
Read the agreement, monitor excess liquidity, interest, concentration add-ons, and cross-collateralization, and stress gaps rather than smooth daily moves. Keep independent cash reserves and avoid using the maximum available borrowing. Do not assume a stop order caps margin loss, that a broker must issue advance notice, or that diversified positions remain offset during a correlated market shock.