A Margin Violation Warning is an automated courtesy message indicating that your account is at or close to a margin violation. This warning is designed to prompt account holders to check their account status and take necessary actions to maintain account stability and avoid potential forced liquidations.
When is a Margin Violation Warning triggered?
The warning is automatically triggered when:
- Your account's Excess Liquidity as a percentage of Net Liquidation Value (NLV) falls below 10%.
- The system detects potential risk to your account's margin status as the Margin Cushion declines.
It is important to note that you can receive a Margin Violation Warning for a low Margin Cushion even if you do not actively use margin. The warning is based on your account's Excess Liquidity, which can be affected by various factors beyond just margin usage, including:
- Market fluctuations affecting the value of your holdings
- Pending orders or recent transactions
- Currency exchange rate changes in multi-currency accounts that can potentially reduce NLV
- Fees or dividends being processed
Understanding Excess Liquidity:
- Excess Liquidity is the amount of funds in excess of the account's current Maintenance margins and the additional funds available in your account to withstand market fluctuations before a margin call occurs. It plays a crucial role in maintaining your account's stability.
What should I do if I receive a Margin Violation Warning?
If you receive this warning, you should:
- Immediately review your account status.
- Consider taking actions to increase your Excess Liquidity, such as:
- Adding funds to your account
- Reducing positions
- Closing out high-risk trades
How can I prevent receiving Margin Violation Warnings?
To minimize the likelihood of receiving these Margin warnings:
- Ensure your account's Excess Liquidity as a percentage of the Net Liquidation Value remains above 10%.
- Regularly monitor your account's status, including your Excess Liquidity and Net Liquidation Value.
- Maintain sufficient funds to meet margin requirements.
- Be aware of how market fluctuations and pending transactions might affect your account's status.
Note
- It is the account holder's responsibility to prevent Excess Liquidity deficits. Failure to maintain sufficient Excess Liquidity may result in account liquidation.
Additional Information
- Margin requirements and account management in the Knowledge Base.