Dubai: A margin call is when a broker demands an investor deposit additional money or securities so that the margin account is brought up to the minimum maintenance margin. Margin calls occur when your account value falls to a value calculated by the broker.
A 25 per cent drop on the Dubai index from December 1 through December 17 triggered a lot of margin calls by brokers, which aggravated the selling pressure on the UAE markets.
To keep a check on leveraged trades, the Emirates Securities and Commodities Authority allowed the brokerages to sell client shares if they don’t cover any shortage in margin within two days of a margin call.
The brokerages must ensure that the aggregate funds allocated to margin trading by the brokerage company must not exceed 300 per cent of the total of the principle capital (Tier 1) and the additional capital (Tier 2) in accordance with the criteria of financial solvency approved by the regulator.
Amounts of margin funding given to one client may not exceed 10 per cent of funds allocated to margin trading by the brokerage company.
