Initial Margin: Definition, Minimum Requirements, Example

Today, we will talk about the subject of Initial Margin. Initial margin is the percentage of the purchase price of a security that must be covered by cash or collateral when using a margin account. The current initial margin requirement set by the Federal Reserve Board’s Regulation T is 50%, but some equity brokerage firms may set their initial margin requirement higher. To open a margin account, an account holder first needs to post a certain amount of cash, securities or other collateral, known as the initial margin requirement. Futures exchanges may set initial margin requirements as low as 5% or 10% of the contract to be traded. Initial margin is distinct from maintenance margin, which is the amount of equity that must be kept in the margin account going forward. An example of initial margin is when an account holder wants to purchase shares of a company, and deposits the initial margin requirement, which gives the account leverage.
c8a8

Видео Initial Margin: Definition, Minimum Requirements, Example канала Simple Explain