What Is the Primary Purpose of a Maintenance Margin Requirement?
The primary purpose of the maintenance margin is to act as a buffer against potential losses from adverse price movements. It is set below the initial margin to allow for some daily fluctuation without triggering a margin call.
By requiring a trader to maintain a minimum equity level, the clearing house ensures that the trader has enough skin in the game to cover immediate losses and that the risk of a trader's default is minimized before a forced liquidation is necessary.
