Buying on margin meaning

Buying on margin is the purchase of securities using broker credit under a margin account. The client pays an initial margin (a down payment) and the broker finances the balance, taking security over the purchased securities and other eligible collateral in the account. A maintenance margin must be maintained; if values fall the broker may issue a margin call and may liquidate positions or sell collateral to restore margin. The term is not defined in UK or Irish statute; it is a market expression used across investment and securities-financing practice. Typical legal features are set out in the client agreement: a security interest or charge over assets, rights to call margin and close out, any rehypothecation consent, interest on debit balances, and risk disclosures. Regulation is by conduct and prudential rules rather than statutory margin limits. In the UK, FCA rules (COBS, CASS and MIFIDPRU/IFPR) govern client treatment, custody and firm capital; leverage limits apply to certain products (notably CFDs) under FCA product-intervention measures. In Ireland, equivalent MiFID II requirements and Central Bank of Ireland interventions apply. Brokers set minimum margin levels for cash equity margin lending within this framework. Buying on margin is high risk and can magnify losses.