Maintenance margin can be defined as the minimum amount of equity or the marginal amount of equity that must be held in the margin account. This rule applies to all the investors that bring their securities to the margin accounts. According to the rules and regulations of New York Stock Exchange and FINRA it is mandatory for an investor that has brought his securities to the margin account to keep or maintain the 25 percent of the total market value of the securities in the margin account. While placing the securities in margin account investors must keep in mind that 25 percent of securities to be maintained in the account are the minimum requirement and many brokers or institutions require a high amount of maintenance such as 30 or 40 percent. There are a number of other names given to maintenance margin such as minimum maintenance or minimum maintenance requirement.
There is also a Federal Reserve Regulation T regarding the maintenance margin and margin account. According to this regulation if an investor or trader buys on margin her or she has to keep the key maintenance level throughout the useful and active life of the trade. The first regulation regarding this context is that the broker cannot grant any additional credit to the investor having less than $2000 cash or equally worth securities in his account. In addition to that there is a second regulation according to which a minimum 50 percent of margin is required for the investor to enter the trade and the last regulation is that the investor must maintain 25 percent of equity in the account.
Other Related Accounting Articles: