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Simple English definitions for legal terms
remargining
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A quick definition of remargining:
Term: REMARGINING
Definition: Remargining is when you have a special account with a broker to buy stocks with borrowed money. If the value of the stocks you bought goes down, you might not have enough money left in the account to pay back the loan. When this happens, you need to put more money or other valuable things into the account to make sure you can pay back the loan. This is called remargining.
A more thorough explanation:
Definition: Remargining is a term used in the securities industry to describe the process of depositing additional cash or collateral with a broker when the equity in a margin account falls to an insufficient level.
For example, let's say an investor has a margin account with a broker and has purchased $10,000 worth of stock. The investor has put up $5,000 of their own money and borrowed the remaining $5,000 from the broker. If the value of the stock falls and the equity in the account drops below a certain level, the broker may require the investor to deposit additional funds or securities to bring the account back up to the required level. This process is known as remargining.
Another example could be an investor who has a margin account with a broker and has purchased $20,000 worth of stock. The investor has put up $10,000 of their own money and borrowed the remaining $10,000 from the broker. If the value of the stock falls and the equity in the account drops below a certain level, the broker may require the investor to deposit additional funds or securities to bring the account back up to the required level. This process is also known as remargining.
These examples illustrate how remargining works in the securities industry. It is important for investors to understand the risks involved in trading on margin and to be prepared to deposit additional funds or securities if necessary to avoid a margin call.