What Is the Relationship between the Margin Requirement and the Concept of “Liquidity” in the Futures Market?

Margin requirements are inversely related to liquidity. When a market is illiquid, the risk of not being able to close a position quickly without a large price impact is higher.

Therefore, clearing houses typically increase margin requirements for less liquid contracts to cover the greater potential for loss during forced liquidation. Higher liquidity allows for lower margin requirements.