What Is an Initial Margin?

Initial margin is the margin that investors must pay as equity when purchasing securities to a certain percentage of the total market value of securities. The rest is borrowing from brokers. Brokers cannot borrow as much money as they want to buy securities for investors. The United States "Securities Exchange Act 1934" stipulates that the amount that brokers lend to investors must not exceed a fixed ratio of the market value of the securities purchased. ^[1]

Initial margin

Initial Margin refers to

Investment clients enter

If after the client opens a position, the investor's initial margin settlement balance is lower than a certain level prescribed by the exchange due to the adverse changes in the stock index, the investor must pay a certain amount of margin so that the margin balance reaches the required Level (usually the level of the initial margin), this additional margin is called maintenance margin, also called supplementary margin. If the client refuses to add additional deposits, the members of the exchange (brokerage companies) will automatically close out the client to prevent the client from over-eating and no money to be delivered.