How Does “Maintenance Margin” Prevent a Trader’s Position from Leading to a Deficit for the Clearing House?
Maintenance margin is the minimum level of collateral a trader must maintain in their margin account. If the account balance drops below this level due to adverse price movement, the trader receives a "margin call" and must deposit additional funds (variation margin) to bring the balance back up to the initial margin level.
This process ensures that the clearing house has sufficient collateral to cover potential losses before the trader's account goes into deficit.
