Margin Call

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Margin Call

A demand by a Broker that an investor who has purchased Securities using credit extended by the broker (on margin) pay additional cash into his or her brokerage account to reduce the amount of debt owed.

A broker makes a margin call when the stocks in the account of the client have fallen below a particular percentage of their market price at the time of purchase, thereby increasing the outstanding debt and the broker's liability should the client become unable to pay. This process is also known as remargining.

A broker might also make a margin call when a client desires to make additional purchases of stock and securities.

References in periodicals archive ?
It is great to see Northern Trust and other leading global fund administrators recognize the benefits of an automated margin call process, including lower operational risk, increased transparency and improved client and counterparty satisfaction.
To keep a check on leveraged trades, the Emirates Securities and Commodities Authority allowed the brokerages to sell client shares if they don't cover any shortage in margin within two days of a margin call.
Sebastian Holding faced $511m in margin calls but the group claimed that Deutsche Bank put through these trades, unauthorised, and should not have been booked.
even in the best-case scenario, where the option expires leaving the seller to bank the premium, unexpected margin calls can disrupt the strategy during its volatile lifespan.
Li Shiu-li, general manager of Jih Sun Securities Investment Consulting, advised investors to stay away from life-insurance shares and weak electronic shares, as they will face heavy pressure for margin calls.
The financers, including non- banking finance companies ( NBFCs) and stock brokers who arrange funds for promoters, offloaded huge volume of pledged stocks due to a margin call sending share prices down, market analysts said.
Sumner Redstone and Lionsgate's Michael Burns, meanwhile, were hit by margin calls, losing a portion of their personal stakes in recent weeks.
Margin calls, both by brokers to investors and by exchanges to brokers, added to the pressure, with brokers saying they were unable to trade until they paid their margin calls.
She also wants the Securities and Exchange Commission to require firms to instruct potential traders that they must earn substantial money simply to pay their trading commissions (an average of $16 per trade), and ban them from helping customers secure loans to pay for margin calls.
But when tech shares and other highfliers dropped significantly, most notably this April, several investors suffered margin calls.
He cited ten reasons for the market's roller coaster performance-from the recent ruling on the break up of Microsoft, and the rise of on-line brokerage and chat rooms filled with misinformation to margin calls and an April 14th speech by Allan Greenspan, buried in news reports, which stated that the Federal Reserve Bank would not bailout bad investment decisions-a major reversal of policy.
But now that a cloud of uncertainty has returned to the markets and brokerages are calling in their loans, many of the same investors have had to sell their securities to meet the margin calls, helping to propel prices lower across nearly all indexes and exchanges.