Answer: To protect lenders by requiring sufficient borrower equity
Notes: Margin requirements ensure investors maintain a minimum equity percentage in their accounts. Initial margin is set before a trade, and maintenance margin must be upheld throughout. If equity falls below the maintenance margin, a margin call is issued. This system aims primarily to protect brokers and lenders from losses if securities lose value. U.S. regulations on margin trading are set by the Federal Reserve Board under Regulation T.
