Why Is the Initial Margin Always Higher than the Maintenance Margin?
The initial margin is set higher than the maintenance margin to provide a safety cushion for the clearing house and the broker. This buffer is designed to absorb losses that occur during a trading day before the maintenance margin level is breached and a margin call is issued.
This gap allows the broker time to monitor the account and for the trader to deposit additional funds, preventing immediate liquidation and providing a first line of defense against market volatility.
