What are margin requirements?

A Margin Requirement is the percentage of marginable securities that an investor must pay for with his/her own cash. It can be further broken down into Initial Margin Requirement and Maintenance Margin Requirement. According to Regulation T of the Federal Reserve Board, the Initial Margin requirement for stocks is 50%, and the minimum Maintenance Margin Requirement is 25%, while higher requirements for both might apply for certain securities.

An Initial Margin Requirement refers to the percentage of equity required when an investor opens a position. When an investor holds securities bought on margin, in order to allow some fluctuation in price, the minimum margin requirement at Firstrade for most stocks is lowered to 25%. This is called the Maintenance Margin Requirement. When the investor is unable to maintain the equity above the maintenance margin requirement, a margin call occurs.