Why is a broker's margin requirement often higher than 25%?

FINRA's 25% is a minimum for long stock, and brokers are free to ask for more. Most set house requirements above it, and raise them further on stocks they consider risky collateral: volatile, low-priced or thinly traded names, recent listings, leveraged funds and positions that make up a large share of an account.

Can a stock's margin requirement change while you hold it?

Yes. Brokers review requirements and can raise one at any time, often after a sharp move or when a holding grows large in the account. A higher requirement applies to positions you already hold, so it can cause a margin call even on a day when the price did not move.

Is the margin requirement the same for buying and short selling a stock?

No. Buying on margin starts at Regulation T's 50% and then follows the long maintenance requirement. A short sale also opens at 50% of the proceeds on top of the proceeds themselves, and FINRA sets separate short-stock minimums, generally 30% of market value or $5 a share for stocks at $5 and above.

Stock Margin Requirements: Check One Before You Borrow

Q: Stock Margin Requirements: Check One Before You Borrow

Each marginable stock carries two requirements. The opening one is Regulation T's 50% of the purchase. The maintenance one is at least 25% of market value for long stock under FINRA Rule 4210, and brokers set their own higher figure stock by stock, up to 100% on names they consider risky. Look it up on the broker's margin requirements page or order ticket before you borrow.

“Maintenance requirement: 40%.” The figure sits on the quote page or the order ticket at most brokers, often in small type next to the buying power estimate. It’s easy to skip. It also decides, more than anything else on the screen, how hard that particular stock can be leaned on.

Which requirements apply to a stock?

Two, at different moments.

The opening requirement applies when you buy. Under the Federal Reserve Board’s Regulation T you pay at least half the price of a marginable stock yourself, so $10,000 of your money can buy up to $20,000 of it. Initial margin has the detail.

The maintenance requirement applies every day you hold it. For long stock, FINRA Rule 4210 requires your equity in the position to stay at a quarter of its market value or more. Brokers then set their own house requirement for each stock, which can be anywhere from that floor up to 100%, and the house figure is the one that triggers your call.

Why do requirements differ from stock to stock?

Because the stock is the broker’s collateral. A lender wants collateral it can sell quickly for close to the screen price, so the less a stock looks like that, the more equity the broker wants you to hold behind it.

The usual reasons for a higher figure are volatility, a low share price, thin trading, a recent listing, and concentration, where one stock makes up a large share of the account. Leveraged and inverse funds commonly carry higher requirements too. At the far end the requirement reaches 100%, which means the stock supports no borrowing at all; stocks with no loan value covers that case.

How much does the figure change the call price?

A lot. Take a hypothetical purchase of 500 shares at $50, $25,000 in total, half of it borrowed.

The same trade, the same price, the same loan. At FINRA’s floor the stock can fall a third before a call. At a 40% house requirement it can fall about 17%. At 70% the loan should never have been taken.

That last line is the trap. Opening a position follows Regulation T’s 50%, but a stock whose house maintenance figure is above 50% can be bought at the opening limit and be under water on the requirement from the first minute, which is why the maintenance figure has to be checked before the order, not after the call. The margin call calculator takes any requirement you enter.

What happens when a requirement goes up?

It hits positions you already hold. Keep the same 500 shares at $50 and the $12,500 loan, so equity is $12,500. Now the broker lifts the stock’s house requirement to 60%.

The price didn’t move. The call arrived anyway.

Raises like this tend to come in clusters, after a stock gaps, when its volatility jumps or when it grows into a large share of the account, and they rarely come with much notice, which leaves you choosing between finding cash quickly and letting the broker sell part of a position at a moment you didn’t pick. Leave room for it. A loan sized to survive a doubled requirement is a loan that rarely surprises you.

What about short sales?

Short positions follow their own minimums under FINRA Rule 4210, because a short position’s loss grows as the price climbs, with no ceiling.

So a short position in a $3 stock needs equity at least equal to the whole market value of the shares. Brokers add house requirements here too, often steep ones on heavily shorted names, along with a stock borrow fee that can climb at the same moment.

Where do you find the figure?

Most brokers show it in one of three places: a margin requirements lookup on the website, the quote page or order ticket for the stock, and the positions screen once you hold it. Some publish a list of stocks with special requirements. A change usually arrives as an account message, sometimes with little notice.

Then check the account as a whole. With several holdings, each carries its own requirement, and the call comes when equity drops below their total; the stock margin analyzer walks through that sum with two positions. Requirements are a floor your broker can raise, and the maintenance margin page explains what happens when equity crosses it. More on borrowing against stocks sits under margin, leverage and risk.