Definition

Noun: A margin call is a demand from a broker or lender for an investor to deposit additional money or securities into their margin account. This demand occurs when the value of the investor's account falls below the broker's required minimum maintenance level, which is set to cover potential losses.

Usage

A margin call is issued to protect the broker from the risk of the investor's losses exceeding their deposited collateral. The investor must meet the call by adding more funds or assets; otherwise, the broker may sell some of the investor's holdings to bring the account back to the required level.

Examples

• The sudden drop in the stock's price triggered a margin call from his brokerage firm.
• She had to liquidate other assets quickly to meet the margin call.
• Investors using leverage must be prepared for the possibility of receiving a margin call.

Advanced Usage

• "To issue a margin call": The act of the broker formally demanding additional funds.
  • The brokerage will issue a margin call if your equity falls below 25%.
• "To meet/satisfy a margin call": The act of the investor providing the required additional funds or securities.
  • He sold some bonds to satisfy the margin call.
• "To face a margin call": To be in a situation where one is likely to receive or has received such a demand.
  • Many traders faced margin calls during the market crash.

Variants and Related Words

• Maintenance Margin Call: The most common type, issued when the account equity falls below the maintenance margin requirement.
• Federal Call / Reg T Call: An initial margin call issued when a new position is opened without sufficient equity to meet the initial margin requirement set by Regulation T.
• Margin Account (n): The type of brokerage account that allows borrowing to purchase securities, making margin calls possible.
• Liquidation (n): The forced selling of assets by a broker if a margin call is not met.

Synonyms

• Maintenance call
• Fed call (specifically for Regulation T initial calls)

Related Terms and Concepts

• Leverage: The use of borrowed money to amplify potential returns, which increases the risk of a margin call.
• Collateral: The assets in the margin account that secure the loan from the broker.
• Forced Liquidation: The result of failing to meet a margin call, where the broker sells the investor's positions without their consent.

Noun

1. a demand by a broker that a customer deposit enough to bring his margin up to the minimum requirement