Margin Call
A demand from a broker for an investor to deposit additional funds because a margin account's value has fallen below the required level.
What is Margin Call?
A margin call occurs when the value of securities in a margin account falls below the broker's maintenance margin requirement — the minimum equity percentage that must be maintained. When this happens, the broker requires the investor to deposit additional cash or securities to bring the account back to the required level. If the investor does not meet the margin call promptly (often within 24 hours), the broker can forcibly liquidate securities in the account to restore the required equity. Margin calls are amplified by leverage: a 50% initial margin allows $20,000 of securities with $10,000 cash, but a 25% drop in the securities' value to $15,000 triggers a margin call if maintenance margin is 30%. Forced liquidations during market downturns can cascade into broader selloffs.
Example
During the March 2020 crash, hedge funds and investors using leverage faced massive margin calls as stock prices fell 30%+ in weeks. The Archegos Capital collapse in March 2021 illustrated this: Archegos had built huge leveraged positions in media stocks using total return swaps. When those stocks fell, prime brokers issued margin calls. When Archegos couldn't meet them, banks liquidated over $30 billion of positions in two days, causing further price drops.