What are the requirements to set up a margin account?

The following are the requirements that investors must fulfill before setting up a margin account: 1. Minimum Margin The investor is required to deposit a minimum margin in the margin account before they can start trading.

What is a minimum margin?

Minimum Margin The investor is required to deposit a minimum margin in the margin account before they can start trading. FINRA requires a minimum margin of $2000, or 100% deposit equivalent to the 100% purchase price of the securities they want to buy on margin. 2.

What is a margin trading account?

Different margin trading accounts have their own minimum margins, though regulations establish the bare minimum. A margin account allows an investor to buy securities long or sell securities short on a line of credit extended to the investor by the broker.

Why are margin requirements set by the SEC?

Margin requirements are set by the SEC to ensure that investors take on an appropriate risk level. Margin is a high-risk proposition since investors might owe more on their positions than what was initially borrowed. Trading on margin through a margin brokerage account creates a higher level of risk than a typical brokerage account.