TERM
FORMULA
EXPLANATION
ASSET
  • Cash balance
  • LMV
--
No. of Shares x Closing Price
 Amount of cash in your Credit Balance Account
Long Market Value is the current value of the securities in your account
LIABILITIES
Loan
--
 Amount of money borrowed
Equity
 Cash + LMV - Loan Excess value of securities over the debit balance in a margin account= cash collateral plus (no. of share multiplied by closing price) less amount of borrowed funds)
Initial Margin (IM)
Cash + LMV - Loan
 Margin ratio of individual securities
Margin Requirement(MR)
No. of Shares x Closing Price x Margin Ratio
 A requirement that investors deposit a minimum amount of money or collateral in securities in their account with the broker before they start trading in that account.= value of securities multiplied by initial margin (IM)
Excess Equity (EE)
Equity - MR
 The differences between the equity balance and the margin requirement (MR).
Purchasing Power (PP)
EE/IM
 Purchasing power will vary according to the initial margin (IM). For instance, if the initial margin is set at 70%, it means you can buy less stocks than if it is set at 50%.
Maintenance Margin (MM)
Equity / Asset x 100
 Minimum percentage equity as investors must maintain in a stock purchased using borrowed funds. A ‘margin call’ is issued if the equity balance falls below the maintenance margin (MM) of 35% and you will be asked to put up additional funds or collateral into your account to bring the margin back to its minimum level. A ‘force-selling margin’ occurs when the equity balance falls below the force-selling margin (FM) of 25%.
Call Margin (Call)
Equity - (LMV x 0.35)
A margin call occurs when the market value of assets collateralizing your margin account unexpectedly falls below a specified minimum amount. The equity balance in your account in turn goes below the maintenance margin (MM) requirement. When this condition happens, you will be asked to top up funds or collateral into your account to bring the margin back to its minimum level.
Force-selling margin (Force)
Equity - (LMV x 0.25)
If the margin call is not met, and the equity balance continues to fall below the force-selling margin (FM), any or all open position in your account will be liquidated by the broker without your permission to pay back debts until the equity meets the margin requirement. This process is known as ‘force-selling margin.’