how margin loan availability works
margin loan availability tells a brokerage customer how much money in their margin account is currently available for purchasing securities on margin and how much is available for withdrawal as the value of the securities in the account rises and falls the amount of money that becomes available for loan also changes since the securities have to cover the amount made available for the loan if the customer s securities drop in value so does the margin loan availability margin loan availability can be used in a couple of specific contexts margin loan availability will change daily as the value of margin debt which includes purchased securities changes but it may not reflect pending trades that fall in between the trade date and the settlement date brokerage firms are required to impose a maintenance requirement on margin accounts which is a percentage of the total market value of the securities purchased on margin if the margin loan availability amount essentially the equity in an investor s account falls below the maintenance margin the investor may be due for a margin call which is a formal request to sell some of the marginable securities or deposit additional cash into the account typically within three days the federal reserve board self regulatory organizations sros such as the financial industry regulatory authority finra and the securities exchanges have rules governing margin trading but brokerage firms can also set more restrictive requirements on their own margin loan availability rises and falls with the value of the securities in an investor s margin account if the account s equity drops too low the investor may face a margin call and have to sell securities to cover the shortfall example of margin loan availabilitylet s say that bert m is a client at ernie s brokerage firm bert has a margin account with some securities in it these securities are held as collateral by ernie s brokerage firm for any money bert borrows to buy securities or withdraw from the account the money borrowed from ernie s firm to buy these additional securities or for a withdrawal is called a margin loan the available amount that bert can take at any given time is called the margin loan availability and is based on the current value of his pledged securities 