FINRA Series 7Processes and Confirms TransactionsMedium
A customer initiates a short sale of 300 shares of XYZ stock at $60 per share in a margin account. The minimum maintenance margin requirement for this short position is:
- A$5,400
- B$9,000
- C$3,600
- D$2,700
Show answer & explanationAnswer & explanation
Correct answer: A. $5,400
For short positions, FINRA's minimum maintenance margin requirement is 30% of the current market value. In this case, the short position is 300 shares * $60/share = $18,000. The maintenance margin is 30% of $18,000 = $5,400.
Why the other options are wrong
- B. This would be 50% of the market value, which is the Reg T initial margin for short sales (or long purchases).
- C. This is 20% of the market value, which is not a standard maintenance requirement for this price range.
- D. This is 15% of the market value, which is not a standard maintenance requirement for this price range.
Short Sale Maintenance Margin
The minimum equity percentage that must be maintained in a margin account for a short position.
- FINRA's minimum is 30% of the current market value.
- Broker-dealers can set higher house maintenance requirements.
- If equity falls below this level, a maintenance margin call is issued.
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