Brokerage firms are increasing their maintenance requirement on margin accounts.
Brokerage firms are doing this because they are uneasy about loaning traders money as we go into the Presidential election and Q4.
You may or may not receive a notification email from your online broker stating something like:
Because the market is currently pricing in heightened uncertainty, we will be increasing our base margin maintenance requirement (house margin requirement) from 25% to 30%, beginning Monday, October 19, 2020.
Ironically, the very act of increasing the margin maintenance requirement leads to greater market volatility and uncertainty. This could have a negative impact on markets because it means that margin calls are going out to tens-of-thousands of traders who are maximum margin. They will need to either put new money into the market or sell some of their existing positions to meet the new margin maintenance requirement. In my experience, more traders sell their existing positions rather than put new money into the market.
It says a lot when the financial firms that are more than happy to loan you money to trade with, and then feed off your dead body when you blow up your trading account, even they are saying what a minute, we’re uncomfortable loaning traders money right now because we don’t want to have thousands of traders stiff us on margin fees all at once if the market plunges.