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What is Margin Call?

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Margin Call is a request from the broker to the investor to add funds to the margin account to meet the minimum capital requirement. It occurs when the investor's equity percentage in the margin account falls below the minimum amount specified by the broker. An investor's margin account contains securities purchased with a combination of the investor's own funds and funds borrowed from the broker.

Margin call specifically refers to a demand from the broker for the investor to deposit additional funds or securities into their account. By doing so, the value of the investor's equity and the value of the account can increase to the minimum value set by the maintenance requirements. Usually, a margin call is an indicator that the value of securities held in a margin account has decreased. When a margin call occurs, the investor must decide whether to add funds or collateralizable securities to the account or choose to sell some of the assets held in the account.

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