What is the debt on the margin?
Mannic account is an account that a brokerage company uses to borrow a customer to buy securities. The market value of the purchased securities serves as a loan for a loan. Margin debt concerns the difference between the market value of the stored collateral and the loan balance plus the interest -raised interest. Not all securities can be purchased at the edge. Price securities that can be purchased on a margin's account are called Marginail . Most low affordable, highly volatile or speculative shares are not marginumable.
In the US, the maximum percentage of securities that can be purchased on a loan or margin, according to the regulations issued by the Federal Reserve Council. For example, if the percentage of the margin is actually 50%, the customer could buy marginrable securities worth $ 100 (USD) with an initial deposit of $ 50. The brokerage company would then give the customer another $ 50 for the transaction. Individual brokerage firms can set their ownCredit requirements that may be lower than the maximum level set by the federal reserve reserve.
The amount of debt on the margin on the customer's account will fluctuate based on the market value of securities purchased in the account. Since the value of securities in the margin account may change on the basis of the total market conditions, after the customer originally purchased securities on the margin, he must always maintain a specified percentage or minimum margin. For example, if a minimum maintenance requirement is 25%, the customer's own capital must be a minus -saved securities account - at least 25% of the total account value. Brokery companies can set minimum margin requirements that exceed the requirements set by the federal reserve reserve.
If the Market Value of Securities in the Customer's Margin ACCOUNT drops below the required maintenance levelThe NEME edge, the intermediary company sends the Customer Margin a call . The customer must increase cash or securities in their account to increase the account value to a minimum maintenance margin. If the customer does not meet a margin call, the intermediary company sells part of the securities in the account to increase the capital on the account to the minimum margin maintenance level.
The total amount of margin debt, which applies at any time, is often used as an indicator of the predominant sentiment of investors. Generally, the increase in the level of margin debt coincides with the wide assembly on the stock market. In many cases, a sharp decline on the stock market may launch a margin call, resulting in the sale of securities on customer accounts, which may worsen the market drop.