margin requirement


Also found in: Financial, Acronyms.

margin requirement,

that part of a security's price that a buyer must pay for in cash. The balance of the price is met by the broker, who, in effect, is supplying a client with a loan. The smaller the margin, the greater the inducement to speculation. Low margin requirements were considered an important cause of the 1929 collapse of the American stock market. In 1934, the Securities Exchange Act gave the Federal Reserve Board the power to regulate margin requirements. The amount has been reset at various times, but in recent years, the Federal Reserve has instituted a 50% margin requirement with a $2,000 minimum.
References in periodicals archive ?
application of margin requirement standards could certainly lead to
The Commodity Futures Trading Commission (CFTC) exempted non-financial end users from its margin requirements, but the Federal Reserve and other banking regulators have taken the opposite position and plan to impose margin requirements on end users by mandating that banks collect margin from end users with significant exposures.
While an inverse relationship has been found to exist between margin requirement and volatility, the causal connection has not be clearly established since volatility is known to be serially correlated and is mean reverting.
The KSE Chairman impressed upon the SBP Governor that since there has been a drastic drop in the value of share during the last two years, the margin requirements of 50 per cent announced by the SBP be reduced to 30 per cent to enable investors to invest at current attractive levels.
Figure 1 plots stock market volatility and Regulation T margin requirements historically.
Like the margin requirement, the capital requirement is subject to regulatory rulemaking.
The swaps push out and reporting rule could impose onerous reporting requirements and as mentioned above, some margin requirements occur which are not in place now.
The CME has already hiked margin requirements for gold futures (earlier this month), throwing off smaller market participants and triggering a small price pullback," said VTB Capital analyst Andrey Kryuchenkov in a note.
This deposit, which is required for each open trade on your account, is known as the margin requirement.
On Monday, silver began to plunge because the Commodity Exchange raised the margin requirement for silver the previous Friday.
Considering the improvement in the external sector, the Monetary Board also decided to remove the minimum cash margin requirement of 100 per cent against Letters of Credit opened with commercial banks for the import of certain categories of motor vehicles, imposed on 30th August 2013.
This means that any excess margin in an account for one of the Indian Rupee products can be used to cover an account in the other Indian Rupee product that has fallen below the margin requirement.