Marginikutsut

Marginikutsut is a Finnish term that translates to "margin calls" in English. It refers to a demand from a broker or exchange for an investor to deposit additional money or securities into their margin account. This occurs when the value of the securities in the account falls below a certain level, known as the maintenance margin.

When an investor trades on margin, they are essentially borrowing money from their broker to purchase securities. This leverage can amplify both gains and losses. The margin account is secured by the securities themselves. If the market value of these securities drops significantly, the investor's equity in the account may fall below the required maintenance margin.

Upon receiving a marginikutsut, the investor has a limited time to meet the demand. Failure to do so can result in the broker automatically selling some or all of the securities in the account to cover the deficit. This forced liquidation can happen at a loss for the investor, as the broker may sell the assets at the current market price, regardless of whether it is favorable.

Marginikutsut are a risk management tool designed to protect both the investor and the broker from excessive losses. Understanding the conditions under which margin calls can occur and the potential consequences is crucial for anyone trading with borrowed funds. Investors should carefully monitor their account balances and be aware of the margin requirements set by their broker.