the difference between the selling price and the purchase price of an item usually expressed as a percentage of the selling price. Compare mark-up. Glossary of Business Terms
————
Financial safeguards to ensure that clearing members (usually companies or corporations) perform on their customers' open futures and options contracts. Clearing margins are distinct from customer margins that individual buyers and sellers of futures and options contracts are required to deposit with brokers. Within the futures industry, financial guarantees required of both buyers and sellers of futures contracts and sellers of options contracts to ensure fulfilling of contract obligations. FCMs are responsible for overseeing customer margin accounts. Margins are determined on the basis of market risk and contract value. Also referred to as performance-bond margin. Chicago Board of Trade glossary
————
Margin in futures is a performance bond or "earnest money." Margin money is deposited by both buyers and sellers of futures contracts, as well as sellers of futures options.
See initial margin. The CENTER ONLINE Futures Glossary
————
margin, gross margin, net margin, security margin, variation margin
(1) An amount of cash or collateral that a buyer or borrower must provide in excess of value owed to that buyer or borrower by a seller, lender or depositor. Ensures performance by the buyer or borrower. Initial margin is posted at inception. Variation margin is the amount of any additional margin needed to correct deficiencies in the currently posted margin.
(2) The amount by which the coupon rate for a floating- or variable- rate financial instrument differs from the defined index for that coupon rate. For example, if a floating-rate note requires that the coupon rate be set at 250 basis points above 30-day LIBOR, the gross margin is 250 basis points. Can also be the amount added to, or subtracted from, the index in determining the instrument's fully indexed rate. Investors in adjustable rate mortgage-backed securities (MBSs) receive a coupon rate that is lower than the fully indexed rate because the cost of servicing, the servicing spread, is deducted. The gross spread minus the servicing spread is called the net margin or the security margin.
(3) In a firm's profit and loss statement, margin is the difference between sales price and the cost of goods sold. It may be expressed as a dollar quantity or as a percentage of the cost of goods sold. American Banker Glossary
————
Allows investors to buy securities by borrowing money from a broker. The margin is the difference between the market value of a stock and the loan a broker makes. Bloomberg Financial Dictionary
Related: security deposit (initial)}}. Bloomberg Financial Dictionary
In the context of hedging and futures contracts, the cash collateral deposited with a trader or exchanged as insurance against default. Bloomberg Financial Dictionary
————
See Performance Bond. Chicago Mercantile Exchange Glossary
————
A payment made by buyers and sellers of exchange traded futures contracts and writers of exchange traded options to demonstrate their ability to cover their potential losses on their position. The payment is made to the relevant clearing house. Dresdner Kleinwort Wasserstein financial glossary
See also initial margin, variation margin, maintenance margin and intraday margin. Dresdner Kleinwort Wasserstein financial glossary
————
( i) In equity markets, the amount paid by the customer when he/she uses his broker's credit to buy a security.
(ii) For options, the sum required as collateral from the writer of an option.
(iii) For futures, a deposit made to the clearing house on establishing a futures position. Exchange Handbook Glossary
————
Using short-term borrowing within a brokerage account to buy securities. Financial Services Glossary
————
An account with a broker where a client is able to purchase securities on credit after the margin has been deposited. London Stock Exchange Glossary
* * *
1. [countable, uncountable] ACCOUNTING the difference between the price that something is sold for and the cost of producing or buying it. A margin is usually calculated as a percentage of the price that something is sold for, unlike a Mark-Up which is calculated as a percentage of the cost of producing or buying it:
• Prices and margins were down as a result of the recession.
margin on
• The margin on canned soup is 15% to 20%.
• a high-margin product.
• The car division, suffering from weak sales and tight margins (= very small ones ) , made an operating loss.
ˌgross ˈmargin also ˌgross ˈprofit ˌmargin
[countable] ACCOUNTING the difference between the price that a product or service is sold for and the cost of producing it, without including overhead S (= general costs not related to particular products or services ) :
• The company needed a gross margin of around 40% to make a reasonable profit.
ˌnet ˈinterest ˌmargin [countable] BANKING
the difference between the interest that a bank pays to those putting money in the bank and what it gets from those taking out loans; = SPREAD:
• Thanks largely to the widened net interest margin, profitability at many banks jumped in the latest quarter.
the difference between the price that a product or service is sold for and the cost of producing it, including overhead S (= general costs not related to particular products or services):
• The company's net margin neared 28%, making it one of the nation's most profitable industrial companies.
the difference between the price of a product or service and the cost of producing it. Operating margins are calculated by different companies in different ways, but are often similar to gross margin S:
• Phone usage by business customers offers carriers the highest operating margins.
ˈprofit ˌmargin [countable, uncountable] ACCOUNTING
the difference between the price of a product or service and the cost of producing it, or between the cost of producing all of a company's products or services and the total sum they are sold for:
• Slow sales have cut profit margins in the industry.
2. on margin FINANCE if you buy shares or other investments on margin, you buy them with borrowed money:
• Individuals trading on margin sustained heavy losses during last year's stock price declines.
* * *
Margin allows trading without having the full amount of funds available. It is a part-payment of collateral to cover contractual obligations and to insure against potential unlimited loss. Clearing houses in futures markets demand an initial margin from both the buyer and the seller of a futures contract to ensure they will be able to meet their contractual obligations. To ensure that margin requirements keep pace with subsequent market movements, variation margin is also called for. This is calculated by revaluing all positions with reference to the closing prices each day.
* * *
margin UK US /ˈmɑːdʒɪn/ noun [C]
► the amount by which one thing is more or less than another: by a margin of sth »
The president won the election by a tiny margin.
a wide/large/comfortable margin »They are the largest building society by a comfortable margin.
»a narrow/small/slim margin
a 40-vote/5-point/2-to-1, etc. margin »On the New York Stock Exchange, declines outpaced gainers by a 4-3 margin.
»Kennedy's margin of victory was only 719,000.
► ACCOUNTING, COMMERCE the difference between the total cost of making and selling something and the price it is sold for: a low/poor margin »
Intense competition leads to lower prices and margins.
a high/good margin »They wanted to produce higher margin products.
a margin on sth »The company will make a whopping 80% margin on this sale.
»Our increased profits are due to improved margins.
► BANKING the difference between the amount of a loan and the value of the collateral (= property to be given to the lender if the money is not paid back): »
The risk of default needs to be correctly priced in the bank's loan margins.
► FINANCE, STOCK MARKET money, shares, etc. that a client gives to a broker to hold, that protect the broker from loss on a contract
→ See also GROSS MARGIN(Cf. ↑gross margin), NET INTEREST MARGIN(Cf. ↑net interest margin), NET MARGIN(Cf. ↑net margin), OPERATING MARGIN(Cf. ↑operating margin), PROFIT MARGIN(Cf. ↑profit margin)
Financial and business terms. 2012.