Margin Call

A broker's demand that an investor deposit additional funds or securities when a margin account's value falls below the required maintenance level.

A margin call is triggered when the value of securities in a margin account falls enough that the account equity drops below the broker's maintenance margin requirement (typically 25–30% of the total position value). The broker demands that the account holder either deposit more cash, deposit additional securities, or sell positions to bring the account back into compliance.

If the margin call is not met promptly — often within a day or two, sometimes the same day in volatile markets — the broker has the legal right to liquidate positions in the account without the investor's consent, selling whatever is necessary to restore the margin requirement. This forced selling often happens at exactly the worst moment: when markets are already falling and prices are depressed.

Margin calls have been behind some of history's most dramatic market events. The 1929 crash was partly driven by margin calls as stocks fell from heavily leveraged highs. The collapse of Archegos Capital in 2021 triggered simultaneous margin calls from multiple prime brokers, resulting in forced block sales that caused massive price dislocations in stocks like ViacomCBS and Discovery.

This definition is for informational and educational purposes only. Nothing on Finance Compass constitutes financial, investment, or trading advice. Always conduct your own research and consult a qualified professional before making financial decisions.