An Intraday Margin Deficit (IMD) for a day is satisfied if, from the end of the day the IMD occurred to the end of a subsequent day, the customer has made net deposits or otherwise caused an increase in the account’s excess liquidity sufficient to equal the IMD. Net deposits or increases in excess liquidity may satisfy multiple outstanding IMD for the same margin account.
An IMD remains outstanding until satisfied or until immediately after the close of business on the fifteenth business day after the date of the IMD.
Note
- An IMD outstanding for more than fifteen business days is not automatically considered satisfied for the purpose of the 90-day restriction.
See below examples from FINRA Rule 4210:
Note: the term “IML” or “intraday margin level” in the examples below is equivalent to excess liquidity.
Examples: Net Deposits
- Assume a customer’s margin account has a $3,000 IMD on Monday, ends Monday with $2,000 of cash (and no other positions or balances) in the account and has only the following activity during the rest of the week:
- Tue: withdraw $1,500
- Wed: deposit $1,500
- Thu: withdraw $1,500
- Fri: deposit $1,500
This customer has not satisfied the IMD. Although the customer made deposits totaling $3,000 ($1,500 on Wednesday and $1,500 on Friday), the customer made no net deposits from the end of Monday to the end of a subsequent day. The customer’s withdrawals from the end of Monday to the end of a subsequent day always equaled or exceeded the customer’s deposits in the period.
- Assume a customer’s margin account has a $5,000 intraday margin deficit on Monday, ends Monday with $6,000 of cash (and no other positions or balances) in the account and has only the following activity during the rest of the week:
- Tue: deposit $3,000
- Wed: withdraw $500
- Thu: deposit $2,500
- Fri: withdraw $6,000
This customer has satisfied the intraday margin deficit. The customer’s net deposits from the end of Monday to the end of Thursday were $5000. The additional withdrawal on Friday is irrelevant since the IMD was satisfied on Thursday.
Example: Deposits of Securities
Assume a customer’s margin account has a $3,000 IMD on Monday and ends Monday with $4000 of cash (and no other positions or balances) in the account.
- On Tuesday, the customer deposits 400 fully-paid shares of ABC (a margin equity) worth $3,000 when deposited.
- On Wednesday, the customer deposits 100 fully-paid shares of XYZ (a margin equity), worth $2,000 when deposited.
- As of the end of Wednesday, the price of ABC diminished to $4/share.
- There was no other activity on these days
The deposit of ABC on Tuesday was not sufficient to satisfy the IMD. A deposit of fully-paid securities must be “haircut” by the maintenance margin requirement applicable to those securities, so the deposit of $3,000 of fully-paid margin equity securities would only be treated as a net deposit of $2,250 towards the satisfaction of the IMD. (This haircut on the value of the deposited securities would be required even if they would cover a short position in the account.)
The deposit of XYZ on Wednesday satisfied the remainder of the IMD. That deposit increased the account’s IML by $1,500, so from the end of Monday to the end of Wednesday, the customer made net deposits that increased the account’s IML by $3,750. The fact that the value of the ABC had declined is not relevant.
Example: Market Movements
Assume a customer’s margin account has a $2,000 IMD on Monday, ends Monday with 200 shares of ABC (a margin equity) worth $250/share ($50,000 total) and no other securities or balances. This means the account had an IML of $37,500 at the end of Monday. Assume no activity other than the following market fluctuations:
- At the end of Tuesday, ABC is priced at $260/share (so the account has an IML of $39,000)
- At the end of Wednesday, ABC is $240/share (account IML $36,000)
- At the end of Thursday, ABC is $250/share (account IML $37,500)
- At the end of Friday, ABC is $265/share (account IML $39,750)
The account’s IMD was satisfied on Friday because there was a $2,250 increase in the account’s IML from the end of Monday to the end of Friday. It was not satisfied earlier because the IML increases of $1,500 on Tuesday and $1,500 on Thursday may not be added together without also taking into account the IML decrease of $3,000 on Wednesday.
Example: Combination of Deposit and Market Movements
Assume a customer’s margin account has a $2,000 IMD on Monday, ends Monday with 400 shares of ABC (a margin equity) worth $25/share ($10,000 total) and no other securities or balances. This means the account had an IML of $7,500 at the end of Monday. Assume no activity other than the following deposits and market fluctuations:
- On Tuesday, the customer deposited $1,500 cash, which the customer used to buy 60 more shares of ABC. ABC closes the day at $25/share (so the account has an IML of $8,625).
- At the end of Wednesday, ABC is $28/share (account IML $9,660)
The account’s IMD was not satisfied on Tuesday. Although the customer made a deposit of $1,500 and the account’s IML increased by $1,125, these two can’t be added together. The account’s IMD was satisfied on Wednesday since its IML at the end of Wednesday is $2,160 higher than its IML at the end of Monday.
Example: Liquidation
Assume a customer’s margin account has a $2,000 IMD on Monday, ends Monday with 400 shares of ABC (a margin equity) worth $25/share ($10,000 total) and no other securities or balances. This means the account had an IML of $7,500 at the end of Monday. Assume no activity other than the following trades and market fluctuations:
- On Tuesday, the customer sold 100 ABC for $2,500. ABC closes the day at $25/share (so the account has an IML of $8,125).
- At the end of Wednesday, ABC is $28/share (account IML $8,800)
- On Thursday, the customer sold 100 ABC for $2,800. ABC closes the day at $28/share (so the account has an IML of $9,500).
The account’s IMD was not satisfied on Tuesday. Although the customer sold $2,500 of ABC, the account’s IML only increased by $625. On Wednesday, the increase in IML from the end of the day on Monday was $1,300 and insufficient to satisfy the account’s IMD. The account’s IMD was satisfied on Thursday since its IML at the end of Thursday is $2,000 higher than its IML at the end of Monday.