Margin | Practical Law

Margin | Practical Law

Margin

Margin

Practical Law UK Glossary 5-107-6812 (Approx. 3 pages)

Glossary

Margin

The term has two potential meanings:
  • In the context of securities trading, a good faith 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.
  • In the context of loans and certain debt securities, the part of the interest rate reflecting (in broad terms) the profit for the finance party on the loan or debt security. It is usually expressed as a percentage rate above the element of the interest rate that (broadly) represents a finance party's cost of funds (such as EURIBOR or a risk-free reference rate – for example, SONIA).