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I Dont understand margin maintenance requirements

A "cash account" is a type of brokerage account in which the investor must pay the full amount for securities purchased. An investor using a cash account is not allowed to borrow funds from his or her broker-dealer in order to pay for transactions in the account. A "margin account" is a type of brokerage account in which the broker-dealer lends the investor cash, using the account as collateral, to purchase securities. Margin increases investors' purchasing power, but also exposes investors to the potential for larger losses. Here's what you need to know about margin.

Understand How Margin Works

Let's say you buy a stock for $50 and the price of the stock rises to $75. If you bought the stock in a cash account and paid for it in full, you'll earn a 50 percent return on your investment. But if you bought the stock on margin— paying $25 in cash and borrowing $25 from your broker— after paying back the broker, you'll earn a 100 percent return on the $25 you invested (minus any interest you owed the broker).

The downside to using margin is that if the stock price decreases, substantial losses can mount quickly. For example, let's say the stock you bought for $50 falls to $25. If you fully paid for the stock, you'll lose 50 percent of your money. But if you bought on margin, you'll lose 100 percent, and you still must come up with the interest you owe on the loan.

Investors who put up an initial margin payment for a stock may, from time to time, be required to provide the broker with additional cash or securities if the price of the stock falls. some investors have been shocked to find out that the brokerage firm has the right to sell their securities that were bought on margin—without any notification and potentially at a substantial loss to the investor. If your broker sells your stock after the price has plummeted, then you've lost out on the chance to recoup your losses if the market bounces back.

Recognize the Risks

Margin accounts can be very risky and they are not appropriate for everyone. Before opening a margin account, you should fully understand that:

  • You can lose more money than you have invested;
  • You may have to deposit additional cash or securities in your account on short notice to cover market losses;
  • You may be forced to sell some or all of your securities when falling stock prices reduce the value of your securities; and
  • Your brokerage firm may sell some or all of your securities without consulting you to pay off the loan it made to you.
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Self-Regulatory Organizations; ICE Clear Europe Limited; Order Granting ..  — Insurance News Net
ICE Clear Europe states that the changes to the Risk Policy amend the calculation of CDS initial margin requirements to comply with margin requirements under EMIR Article 41 and Article 24 of the implementing Regulatory Technical Standards. /5/ ICE ..

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