What is House Maintenance Requirement?
The minimum amount of equity that an account holder must maintain in a margin account, as determined by the brokerage firm. The house maintenance requirement will often be higher than the maintenance margin set out by the Federal Reserve’s Regulation T, which stipulates that an equity level of at least 25% must be maintained, and it can also be different for different account holders within the firm. Read more for examples and further explanation including related video clips and also comments
Example explains House Maintenance Requirement
Although Reg T states that the lowest the maintenance margin can be is 25%, some brokerage firms may not want to take on the greater risk associated with allowing the lowest possible maintenance margin. To offset the risk, firms will raise the maintenance margin – to levels as high as 40% on some accounts – to limit the size of potential losses if a margin account holder is unable to meet a margin call. If the account holder is unable to meet the margin call, the assets in the account will be liquidated.
[tubepress mode=’tag’, tagValue=’House Maintenance Requirement invest’]