Those securities (aka margin securities), in a customer’s account, that currently have a market value exceeding a specific percentage (above 100%), such as 140% of the debit balance (equity ownership in the form of the owned securities). The amount of excess margin securities must be segregated by the broker, maintaining the customer’s account, and held in a safekeeping account.
For example, a broker may maintain a margin account for a customer who have purchased $50,000 worth of securities on 40% margin. The broker-dealer lends the customer $20,000 (debit balance). The customer can post a certain amount of margin securities as collateral for a broker’s loan:
Margin securities posted as collateral= excess margin percentage × debit balance
Margin securities posted as collateral= 140% × $20,000 = $28,000
Because the customer can only post $28,000 out of the $50,000 as collateral, the remaining $22,000 (i.e., $50,000 – $28,000) worth of securities are considered excess margin securities.
