The amount of money (or the value of assets) deposited by a customer to a broker in order to qualify for a loan to trade securities, or for a margin loan. Similar to collateral, margin may also be deposited by a broker with a clearing member of a futures exchange. If conditions become volatile in the futures market, margin requirements are raised. A clearing member of a futures exchange is also required to pay margin to the clearinghouse.
A margin is not a partial payment on a purchase. At the end of each trading day, profits and losses on open positions are calculated (using the mark-to-market process). If an investor has lost money and his or her margin account is therefore below minimum balance requirements, the broker makes a margin call to inform the investor that he or she needs to deposit additional funds in the account. The Securities and Exchange Commission regulates margins charged on investment accounts used to purchase stocks, bonds, and other financial instruments.