A margin call is a request or demand made by a broker to an investor, requiring them to deposit additional cash or securities into their margin account to meet the minimum maintenance margin requirement. It typically occurs when the value of the securities held in the margin account declines below a certain threshold, and the account no longer has sufficient collateral to cover potential losses. The purpose of a margin call is to protect the broker and ensure that the investor has enough funds to cover any potential losses on their leveraged investments. If the investor fails to meet the margin call, the broker may have the right to sell securities in the margin account to cover the shortfall. Margin calls are an important risk management mechanism in margin trading and aim to maintain the financial integrity of both the investor and the broker.
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