What is a margin call?

Dubai: Volatility in the UAE markets last week was partly triggered by margin calls.

A margin call is when a broker’s demand on an investor to 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 depresses to a value calculated by the broker.

A 25 per cent drop on the Dubai index since the start of the month until 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, asked the brokerages to sell shares of clients if they don’t replenish any shortage in margin within two days of such intimation.