Glossary · PSX Mechanics
Margin Call
A demand from a broker for an investor to deposit additional funds when the value of a margin account falls below the required minimum. Failure to meet a margin call can result in the forced liquidation of positions.
01—What is Margin Call?
The definition — and what it means in practice.
A margin call is a broker’s demand that you add cash or eligible collateral to a margin account when its value falls below the required minimum. This usually happens after market prices move against a leveraged position, reducing the account’s equity relative to the amount borrowed. The broker sets a deadline and specifies how much is needed to restore the required margin level.
Margin calls matter because they can force decisions at the worst time. If you do not meet the call, the broker may reduce risk by selling some or all of your holdings (forced liquidation), potentially locking in losses and creating extra costs. Investors using leverage should understand how quickly margin can shrink in volatile markets and keep a buffer so normal price swings do not trigger urgent funding needs.
If you buy shares with borrowed money and your account drops below the minimum, your broker may ask you to add, say, Rs 10,000 or sell shares.
- A margin call happens when account equity falls below the broker’s required minimum.
- It is triggered by adverse price moves in leveraged positions, not by company fundamentals.
- Meeting a call typically requires adding funds/collateral or reducing the position size.
- Ignoring a call can lead to forced selling at prevailing market prices.
- Keeping a cash buffer can reduce the chance of a call during normal volatility.
02—How margin call works on the PSX
The Pakistan-specific rules, conventions, and numbers.
On the Pakistan Stock Exchange (PSX), leverage is provided through regulated mechanisms such as the Margin Trading System (MTS) and broker Margin Financing (MFS). When you use these facilities, your broker monitors the value of your collateral against the financed amount. If the collateral value falls enough to breach the required margin level, the broker can issue a margin call requiring additional funds or other acceptable cover.
PSX equities are subject to daily price limits (circuit breakers) for most shares, set at ±10% or Re 1 around the previous close (LDCP), whichever is higher. Even within these limits, consecutive adverse moves can quickly reduce collateral value and create a margin shortfall. Because settlement on the PSX is T+1 (one business day), funding and risk-management actions around a margin call can be time-sensitive in practice.
03—Common misconceptions
Where investors most often get this wrong.
A margin call is just a warning; nothing happens if I wait.
A margin call is a demand to restore required margin. If you do not comply, the broker can sell positions to reduce exposure, which may crystallise losses.
Circuit breakers mean I cannot get margin-called quickly.
Price limits can slow a single day’s move, but repeated declines can still reduce account equity. A margin shortfall can develop over multiple sessions.
Adding cash is the only way to meet a margin call.
Depending on the broker’s rules, you may be able to reduce the position (sell) or provide other eligible collateral. The aim is to restore required margin.
04—Using margin call on BSL
Where this term shows up across the platform — with live data.
- Review how borrowing works on our Leverage page.
- Check market moves that may affect collateral on the Market dashboard.
- Use the Stock Screener to focus on more liquid shares when planning leveraged trades.
- Read more related concepts in the Glossary.
05—Frequently asked questions
What investors ask about margin call on the PSX.
Frequently Asked Questions
A margin call is triggered when the value of your margin account falls enough that your equity drops below the broker’s required minimum. This commonly follows price declines in the shares you hold as collateral or in the leveraged position itself.
If you do not meet a margin call, the broker may reduce risk by selling some or all of your positions (forced liquidation) to bring the account back within required limits. The sale happens at available market prices, which may be unfavourable.
Yes. A margin call can occur due to market price movements that reduce the value of collateral or the account’s equity, even if you do not trade further after opening the leveraged position.
Daily price limits (circuit breakers) restrict how far most shares can move in one session versus the previous close (LDCP). They do not remove the risk of margin calls, because declines can occur across multiple days and still erode margin equity.
No. T+1 settlement is the normal timeline for completing trades. A margin call is a separate requirement to top up a leveraged account when its value falls below a minimum, and it can occur regardless of settlement timing.
06—Related terms
Keep building the picture.
The amount of capital an investor must deposit with a broker to open or maintain a leveraged position.
The use of borrowed funds to increase the size of an investment position. Leverage amplifies both potential gains and potential losses. On the PSX, leverage is available through margin trading and futures.
A leveraged trading facility on the PSX that allows investors to take larger positions than their available capital. Positions must be settled within a defined period or rolled over.
A PSX-regulated facility allowing investors to buy shares using financing provided by brokers or financial institutions, with the purchased shares serving as collateral.
A regulatory mechanism that temporarily halts trading in a security or the entire market when prices move beyond a defined threshold. On the PSX, individual stocks generally have upper and lower price limits of 10% or Re 1, whichever is higher, per session to prevent extreme volatility.
The current standard settlement cycle on the PSX, where trades are finalised one business day after the transaction date. The shift from T+2 to T+1 was implemented to reduce counterparty risk and improve market efficiency.
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