# Maintenance Margin Explained: Key Differences from Margin Accounts

## What Is Maintenance Margin?

Maintenance margin refers to the minimum equity that must be maintained in a margin account after an investment is made, as mandated by [FINRA](https://www.investopedia.com/terms/f/finra.asp). While the standard requirement is 25% of the total securities' value, some brokers demand more. This ensures investor accountability and mitigates risks in margin trading. Learn how brokerage agreements, Regulation T, and margin calls play into maintaining these thresholds in margin accounts.

### Key Takeaways

*   Maintenance margin is the minimum equity an investor must maintain in a margin account, typically set at 25% of the account's total value according to FINRA.  
    
*   A margin call occurs when an account's equity falls below the maintenance margin, requiring the investor to deposit more funds or liquidate holdings.  
    
*   The initial margin requirement set by the Federal Reserve's Regulation T allows investors to borrow up to 50% of the security purchase price.  
    
*   Brokers may require higher maintenance margins, sometimes up to 40%, beyond FINRA's minimum of 25%.  
    
*   Maintenance margins and margin calls are safeguards designed to protect investors and brokerages from significant financial losses.

  

## Navigating Maintenance Margin Requirements

FINRA sets a 25% minimum maintenance margin, but some brokerages might require 30% to 40%. Maintenance margin is also called a minimum maintenance or maintenance requirement.

A [margin account](https://www.investopedia.com/terms/m/marginaccount.asp) is an account with a brokerage firm that allows an investor to buy securities including stocks, [bonds](https://www.investopedia.com/terms/b/bond.asp) or [options](https://www.investopedia.com/terms/o/option.asp)—all with cash loaned by the broker. All margin accounts, or purchasing securities on margin, have strict rules and regulations. The maintenance margin is one such rule. It stipulates the minimum amount of equity—the total value of securities in the margin account minus anything borrowed from the brokerage firm—that must be in a margin account at all times as long as the investor holds on to the securities purchased.

So if an investor has $10,000 worth of equity in their margin account, they must maintain a minimum amount of $2,500 in the margin account. If the value of their equity increases to $15,000, then the maintenance margin also rises to $3,750. The investor is hit with a [margin call](https://www.investopedia.com/terms/m/margincall.asp) if the value of securities falls below the maintenance margin.

Margin trading is regulated by the government and self-regulatory agencies to prevent big losses for investors and brokerages. There are multiple regulators of margin trading, the most important of which are the [Federal Reserve Board](https://www.investopedia.com/terms/f/frb.asp) and FINRA.

## Differences Between Margin Accounts and Maintenance Margins

Before opening a margin account, investors and brokerages must sign an agreement. According to the terms of the agreement set forth by FINRA and the Federal Reserve Board, the account requires a minimum margin be met before investors can trade on the account. The minimum or initial margin must be at least $2,000 in cash or securities.

The Federal Reserve Board’s [Regulation T (Reg T)](https://www.investopedia.com/terms/r/regulationt.asp) sets a limit on how much an investor can borrow, which is up to 50% of the price of the security purchased. Some brokers require more than a 50% deposit from the investor.

Once an investor buys a security on margin, the maintenance margin goes into effect, with FINRA requiring that at least 25% of the total market value of the securities be in the account at all times. Still, many brokers can require more as stipulated in the margin agreement.

If account equity drops below the maintenance margin, the broker issues a margin call, requiring the investor to deposit more cash or sell securities to meet the [margin](https://www.investopedia.com/terms/c/crossmargining.asp). Brokers can sell securities in a margin account, sometimes without telling the investor, to meet the margin. Usually, investors get a warning first, and action is taken only if the [margin call isn't met](https://www.investopedia.com/ask/answers/12/what-happens-cannot-pay-margin-call.asp). A [Federal Call](https://www.investopedia.com/terms/f/federal-call.asp) is a special kind of margin call issued by the federal government.

> **Important**
>
> Maintenance minimums reduce brokerage risk if the investor can't pay the loan.

Initial and maintenance account limits, [maintenance and Reg T margin calls](https://www.investopedia.com/ask/answers/052115/what-are-different-types-margin-calls.asp), and FINRA regulations all exist because margin trading has the potential to incur skyrocketing gains—as well as colossal losses. Such losses pose a big risk and, unchecked, can destabilize securities and entire financial markets.

## The Bottom Line

The maintenance margin is a crucial aspect of margin accounts, ensuring investors maintain a minimum level of equity, which FINRA sets at 25%, though many brokers might require more. Investors should understand how a margin call works, as falling below the required maintenance margin can prompt brokers to demand additional funds or liquidate securities. It's essential for investors to grasp the broader regulatory environment where rules from FINRA and the Federal Reserve Board govern margin trading to protect both investors and financial institutions from significant losses.  

> **Article Sources**
>
> 1.  Financial Industry Regulatory Authority. "[Margin Account Requirements](https://www.finra.org/rules-guidance/key-topics/margin-accounts)."
>     
> 2.  TD Ameritrade. "[Margin Handbook](https://www.tdameritrade.com/retail-en_us/resources/pdf/AMTD086.pdf)," Page 5.
>     
> 3.  Electronic Code of Federal Regulations. "[Title 12: Banks and Banking. Chapter II - Federal Reserve System. Subchapter A. Part 220 - Credit by Brokers and Dealers (Regulation T)](https://www.ecfr.gov/cgi-bin/text-idx?c=ecfr&sid=635f26c4af3e2fe4327fd25ef4cb5638&tpl=/ecfrbrowse/Title12/12cfr220_main_02.tpl)."
>     
> 4.  U.S. Securities and Exchange Commission. "[Margin: Borrowing Money to Pay for Stocks](https://www.sec.gov/reportspubs/investor-publications/investorpubsmarginhtm.html)."
>     
> 5.  TD Ameritrade. "[Margin Handbook](https://www.tdameritrade.com/retail-en_us/resources/pdf/AMTD086.pdf)," Page 4.
>     
> 6.  Nasdaq. "[Federal Margin Call](https://www.nasdaq.com/glossary/f/federal-margin-call)."