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Margins! - About Commodity Trading
Margin Requirements Margin Calls
Margin: The amount of money or collateral deposited by a customer with his broker, by a broker with a clearing member, or by a clearing member with the clearinghouse, for the purpose of insuring the broker or clearinghouse against loss on open futures contracts.
The margin is not partial payment on a purchase.
- Initial margin is the total amount of margin per contract required by the broker when a futures position is opened.
- Maintenance margin is a sum which must be maintained on deposit at all times.
If the equity in a customer's account drops to, or under, the level because of adverse price movement, the broker must issue a margin call to restore the customer's equity.
DHT: Margin Call
- A request from a brokerage firm to a customer to bring margin deposits up to initial levels.
- A request by the clearinghouse to a clearing member to make a deposit of original margin, or a daily or intra-day variation payment, because of adverse price movement, based on positions carried by the clearing member.