Liquidity · Core
Margin
Margin is collateral posted against a leveraged position — the cash or securities that keep the broker or CCP whole.
Definition
Initial margin is the haircut to open; variation/maintenance is the mark-to-market top-up. Portfolio margin and CCP IM use risk models (SPAN, SIMM). Margin is not a fee; it is trapped capital that procyclically rises in stress.
Why it matters
Leverage capacity is a margin question. A ‘cheap’ basis trade that triples IM is not cheap.
Case
March 2020 futures IM jumped as vol jumped. Positions that were fine on P&L were not fine on cash. The unwind was a margin unwind.
How to read it
Split IM and VM, cash vs securities collateral, and what happens to IM if vol doubles. That is the leverage.
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