initial margin

The amount of money up to 50 percent of the purchase price of securities that can be bought on margin, which is a loan from a broker. The Federal Reserve’s Regulation T sets rules governing margin. Even though 50 percent can be borrowed, some firms require that more than 50 percent of the purchase price be paid with by the trader before he or she can begin to trade. The investments purchased on margin are used as collateral for the loan. A margin call occurs when the amount of money in a trader’s account has decreased below required levels because the prices of his securities have fallen.