A house maintenance requirement is the minimum equity a brokerage firm requires you to keep in a margin account after you buy securities using borrowed funds. It is the broker’s own (house) standard for the maintenance margin and is typically higher and stricter than the legal minimum set by the Federal Reserve’s Regulation T.
Key takeaways
– Regulation T (CFR Part 220) sets a legal minimum maintenance margin of 25% of the market value of securities, but brokers commonly require more.
– Most brokerage “house” maintenance requirements fall between about 30% and 50%, depending on the firm, the client, and the security.
– If your account equity falls below the house maintenance requirement, the broker issues a margin call and can liquidate positions to repay the loan.
– Brokers can set different maintenance rates by account size, creditworthiness, and by security type (volatile or illiquid assets usually carry higher rates).
How house maintenance requirements work
– Basic concept: Equity = Market value of securities − Margin loan. Maintenance requirement is a percentage (m) that equity must be at least of market value: Equity / Market value ≥ m.
– If Equity / Market value < m, a margin call is triggered. You must cure the shortfall (typically by depositing cash/securities or reducing the loan by selling) or the broker can sell positions without your consent to bring the account back into compliance.
– Brokers use house maintenance rates to limit their credit exposure and reduce the chance of forced liquidations that could leave the broker with losses.
Why maintenance requirements are necessary (Bull vs. Bear markets)
– In bull markets, leverage can amplify gains and tempt investors to borrow more. Higher house requirements help prevent excessive leverage.
– In bear markets or during sharp drops (e.g., 2007–2008), rapid value declines can create large margin calls. Stronger maintenance rules reduce the chance of widespread defaults and help brokers manage systemic risk.
What impacts house maintenance requirements
– Borrower profile: Smaller accounts, inexperienced traders, or clients with weaker credit histories often face higher requirements (for example, 40% vs. 30%).
– Type of trade/security: Volatile, low‑liquidity, low‑priced, or exotic securities typically carry higher maintenance requirements. Examples: small-cap stocks, penny stocks, some ETFs, and certain options positions.
– Account size and sophistication: Institutional or high-net-worth clients may receive lower house maintenance rates.
– Market conditions: Brokers can raise maintenance requirements during periods of heightened volatility.
Minimum maintenance requirement by law
– Regulation T requires at least 25% equity be maintained in a margin account. Brokers are free (and common) to impose stricter house requirements.
Example: What does a 30% maintenance requirement mean?
– If maintenance requirement m = 30% and your securities’ market value = $20,000:
• Required equity = 30% × $20,000 = $6,000.
– If you initially borrowed $10,000 to buy $20,000 of securities (50% initial margin), your equity is $10,000. If the market value drops, the price that triggers a margin call can be calculated:
• Let Loan = L, Maintenance m, threshold market value P* satisfies (P* − L)/P* = m → P* = L / (1 − m).
• With L = $10,000 and m = 0.30 → P* = 10,000 / 0.70 = $14,285.71. If market value falls below $14,285.71, you get a margin call.
• That represents about a 28.6% decline from the original $20,000 position.
What is a special maintenance requirement?
– A special maintenance requirement is a higher-than-usual maintenance rate that a broker imposes on specific securities, account types, or individual clients. It is commonly used for:
• Low-priced/penny stocks, thinly traded shares, OTC securities
• Highly concentrated or speculative positions
• New issues or securities with recent volatility
– These requirements can be well above typical house levels (sometimes 50% or higher) to reflect greater liquidation risk.
Warning: what happens if you fall below maintenance
– The broker issues a margin call. You must either deposit cash or marginable securities or sell holdings to restore the required equity.
– If you fail to meet the call, the broker can sell any assets in the account without prior consent and may do so at times and prices it chooses.
– You remain liable for any deficit if the forced liquidation doesn’t fully cover the margin loan.
– Brokers may raise maintenance requirements (and reprice margin interest or reduce buying power) with little or no advance notice in volatile markets.
Practical steps to manage house maintenance requirements
Before opening or increasing a margin position
1. Read the broker’s margin agreement and the broker’s house maintenance schedule. Ask for written rates that apply to your account and to the specific securities you plan to trade.
2. Understand which securities are marginable and the maintenance rates for each. Some securities aren’t marginable at all.
3. Plan stress scenarios: calculate how far prices can fall before a margin call. Use the formula P* = Loan / (1 − m) to find the threshold market value.
4. Limit initial leverage: keep initial margin well above the minimum—this reduces likelihood of margin calls.
5. Maintain a cash reserve outside your margin account to meet potential calls quickly.
6. Diversify holdings to reduce single‑security concentration risk that could trigger special requirements.
During margin use and market volatility
1. Monitor positions daily and set automated alerts for market value drops and equity percentage levels well above the maintenance threshold (e.g., get notified at 40% equity if your house rule is 30%).
2. Use stop‑loss or limit orders judiciously—but understand they do not guarantee execution at a given price in fast markets.
3. Rebalance or hedge concentrated positions to reduce volatility exposure (e.g., buy puts or use options spreads, consistent with your experience and the broker’s rules).
4. Communicate with your broker if you anticipate liquidity issues—some brokers may allow short windows to resolve margin calls but are not obligated.
5. If a margin call happens, act immediately: deposit cash, transfer marginable securities in, or reduce the loan by selling voluntarily to control execution and tax consequences.
If you receive a margin call: immediate practical steps
1. Verify the call and the required cure amount (contact your broker right away).
2. Decide fastest, cost‑effective cure: deposit cash, transfer marginable securities, or sell positions.
3. If selling, try to do so voluntarily to control timing and avoid forced liquidation that may occur at an inopportune moment.
4. Document all communications and confirmations from the broker.
5. If you cannot meet the call, prepare for possible liquidation and the possibility you will still owe any balance after sales.
Special considerations and red flags
– Rapid increases in margin requirements: brokers can increase house maintenance percentages during crises; be conservative.
– Non‑marginable or restricted securities: buying non‑marginable assets on margin is not permitted; holding them can create liquidity traps.
– Options and complex derivatives: these often have very different margin calculations and can require significantly higher maintenance.
– Interest and fees: margin borrowing costs reduce expected returns and can accelerate losses.
Regulatory and industry guidance
– Regulation T (CFR Part 220) sets the legal framework and minimums for credit by brokers and dealers.
– FINRA: guidance on margin accounts and what triggers margin calls; brokers must follow industry rules and disclose margin terms.
– Broker margin handbooks (e.g., TD Ameritrade, Charles Schwab) provide practical, firm-specific rules and examples.
The bottom line
House maintenance requirements are brokerage firms’ safety thresholds that require you to keep a minimum equity percentage in your margin account. They exist to protect brokers (and indirectly the market) from borrower defaults and are typically higher than the 25% legal minimum under Regulation T. Because requirements vary by broker, account, and security—and can change in stressed markets—anyone using margin should understand their broker’s house rules, stress‑test positions, keep conservative leverage, and have contingency liquidity to meet possible margin calls.
Sources and further reading
– Code of Federal Regulations. Part 220—Credit by Brokers and Dealers (Regulation T).
– Financial Industry Regulatory Authority (FINRA). “Brokerage Accounts: Margin Accounts.”
– FINRA. “Know What Triggers a Margin Call.”
– TD Ameritrade. Margin Handbook.
– Charles Schwab. The Charles Schwab & Co. Guide to Margin.
– Calculate your specific margin‑call threshold using your current position, loan amount, and your broker’s house maintenance requirement.
– Summarize a broker’s public margin schedule (if you provide the broker name) so you can compare typical house rates.