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What is the meaning of the terms Maintenance Margin and Variation Margin?

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What is the meaning of the terms Maintenance Margin and Variation Margin?
posted Jul 4, 2017 by Deepak Jangid

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Maintenance Margin
A maintenance margin is the minimum amount of equity that must be maintained in a margin account. In the context of the NYSE and FINRA, after an investor has bought securities on margin, the minimum required level of margin is 25% of the total market value of the securities in the margin account.

Variation Margin
The variation margin is a variable margin payment made by clearing members to their respective clearing houses based on adverse price movements of the futures contracts these members hold. Variation margin is paid by clearing members on a daily or intraday basis to reduce the exposure created by carrying highly risky positions. By demanding variation margin from their members, clearing organizations are able to maintain a suitable level of risk and cushion against significant devaluations.

answer Jul 4, 2017 by Purabi Sarkar
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