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When Does Margin Call Occur?

Margin call will be higher than the difference between maintenance margin and equity assets. 

Margin Call is triggered when there is a margin deficit. The client is required to satisfy the margin call within 3 market days including the date of notice.

Example - Case of margin call

A client deposits $10,000 in cash and $5,000 worth of A shares (IM: 30%, MM: 25%) and $25,000 of B shares (IM: 50%, MM:45%). Suppose the market value of stock B falls to $19,500.

After the client buys the stock and the market value of stock B falls, the client's position is as follows.

Debit BalanceHKD 15,000
Initial MarginHKD 11,250 (HKD 5,000 X 30% + HKD 19,500 X 50%)
Maintenance MarginHKD 10,025 (HKD 5,000 X 25% + HKD 19,500 X 45%)
Equity AssetsHKD 9,500
Margin Call*HKD 1,750

The client needs to ensure that the equity assets in their account reach the margin requirement on or before the specified date.

If the client chooses to sell securities, the market value to be sold is no more than the difference between the initial margin and equity assets/initial margin ratio (IM Ratio)

When the equity balance is lower than the force-selling margin, the client needs to top up the margin deficit amount, otherwise, the position may be liquidated immediately.

*The actual margin call amount can be substantial and is dependent on the nature of the stock, as well as the policies of the company.