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How Does the Initial Margin Requirement Affect Market Liquidity?

A high requirement reduces liquidity by demanding more capital and limiting the total open interest and trading volume.
Greeks.Live23.11.25

How Does the Initial Margin Requirement Affect Market Liquidity?

A high initial margin requirement reduces market liquidity. It demands more capital from traders to open positions, which limits the number of contracts that can be opened and thus reduces the total open interest and trading volume.

Conversely, a low initial margin encourages more trading and higher leverage, thereby increasing market liquidity.

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