Maintenance Margin

Maintenance Margin: What It Is and How It Works

Maintenance margin is the minimum amount of equity an investor must keep in a margin account after buying securities on borrowed funds. It’s typically expressed as a percentage of the total market value of the securities and is intended to protect both the investor and the brokerage from large losses.

Key points

• FINRA sets a minimum maintenance margin of 25%, but many brokers require higher amounts (commonly 30–40%).
• The Federal Reserve’s Regulation T (Reg T) governs the initial margin, allowing investors to borrow up to 50% of a security’s purchase price and requiring a minimum initial deposit (often at least $2,000).
• If account equity falls below the maintenance requirement, the broker issues a margin call requiring additional cash or liquidation of securities.
• Brokers can liquidate holdings to meet margin requirements and may do so without prior consent if the investor fails to meet a margin call.

How maintenance margin is calculated (simple example)

Maintenance margin is usually a percentage of the total market value of the securities in the account.
* If the maintenance requirement is 25% and the securities are worth $10,000, the required equity is $2,500.
* If the securities rise to $15,000, the required equity increases to $3,750.

Account equity = market value of securities − amount borrowed. A margin call occurs when account equity drops below the maintenance requirement.

Margin calls and broker actions

• Margin call: A demand to deposit cash or sell assets when equity falls below the maintenance threshold.
• Broker rights: If the investor doesn’t meet the margin call, the broker can sell securities in the account—sometimes without prior notice—to restore the required equity level.
• Consequences: Forced liquidations can lock in losses and may still leave the investor responsible for any remaining loan balance.

Why maintenance margins exist

Maintenance margins and related rules (Reg T, FINRA guidelines, broker margin agreements) are safeguards to:
* Limit leverage and reduce the chance of catastrophic investor losses.
* Protect brokerages from loan defaults.
* Help preserve orderly markets by preventing unchecked risk-taking that could cascade through the financial system.

Practical tips for investors using margin

• Know your broker’s specific maintenance requirement—many exceed FINRA’s 25% minimum.
• Monitor your account and market conditions frequently.
• Keep a cash buffer or liquid assets to meet potential margin calls.
• Use stop-loss orders or reduce leveraged positions during volatile markets.
• Understand your broker’s liquidation policies and time frames.

Bottom line

Maintenance margin is a core feature of trading on margin. Understanding both the regulatory minimums and your broker’s specific rules, monitoring positions, and preparing for margin calls are essential steps to manage risk when borrowing to invest.

Sources: FINRA; Federal Reserve Regulation T; U.S. Securities and Exchange Commission.