What is the difference between Margin and Cash Accounts?
A Margin account is an account where an investor only needs to keep a portion of the funds as a margin of the total amount with the stockbroker to process his/her trades at the Exchange. This means that the customer places a decided percentage (mutually agreed upon between the investor and the broker prior to operating the account) of the funds with the broker against the net total value of his/her trades carried out through that broker at the stock exchange. The margin amount in essence along with the shares purchased serve as collateral that the investor maintains with the broker to carry out his/her transactions. The Margin amount varies from broker to broker. At Akd Trade all customers are required to maintain 20% margin against his/her outstanding trades/exposure for the purpose of trading in his/her/their account. SECP regulations allows brokers to revise their margin requirements for their account holders if they inform their customers at least 3 days prior to the implementation
A13. In Margin Account, the Client and Broker decide a mutually agreed upon percentage of the funds that are kept with the broker against the net total value of client’s trades carried out through that broker at the stock exchange. This enables the investor to buy and hold more stock without paying for it as a whole. In case of Cash Account, the amount deposited by the Account Holder is fully used and the account holder can only buy/sell shares equal to the funds deposited with the broker.
Related Questions
- If I have a Margin Financing account, can I apply for two Optimal Cash Accounts ie. One to be tagged to my ordinary trading account and the other to be tagged to my Margin Financing account?
- What is the difference between Margin and Cash Accounts?
- What is the difference between cash and margin accounts?
