Margin

Definition

The amount of money or collateral deposited by a customer with his broker, by a broker with a clearing member, or by a clearing member with a clearing organization.

The margin is not partial payment on a purchase.

Also called Performance Bond.

(1) Initial margin is the amount of margin required by the broker when a futures position is opened; (2) Maintenance margin is an amount that must be maintained on deposit at all times.

If the equity in a customer's account drops to or below the level of maintenance margin because of adverse price movement, the broker must issue a margin call to restore the customer's equity to the initial level.

See Variation Margin.

Exchanges specify levels of initial margin and maintenance margin for each futures contract, but Futures Commission Merchants may require their customers to post margin at higher levels than those specified by the exchange.

Futures margin is determined by the SPAN margining system, which takes into account all positions in a customer’s portfolio.

Related Terms

Other terms related to 'Margin' starting with the letter 'M'

Maturity, Mark to Market, Minimum Price Fluctuation Minimum Tick, Market if Touched MIT Order, Minimum Tick

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