Glossary · PSX Mechanics
Margin
The amount of capital an investor must deposit with a broker to open or maintain a leveraged position.
01—What is Margin?
The definition — and what it means in practice.
Margin is the amount of capital you must deposit with your broker to open or maintain a leveraged position. It acts as a security buffer against losses when part of the trade is effectively financed rather than fully paid upfront. Margin requirements can be set as a rupee amount or a percentage of the position value, and they typically change with the instrument, volatility, and your available collateral.
Margin matters because leverage can amplify both gains and losses, and margin rules determine how much price movement you can absorb before you must add funds or reduce the position. If losses reduce your equity below the required level, the broker may issue a margin call or close out positions to restore required cover. Understanding margin helps you plan cash needs and avoid forced selling.
If margin is 30%, a Rs 100,000 leveraged position may require about Rs 30,000 deposit; losses that erode this buffer can trigger a margin call.
- Margin is your required deposit to support a leveraged position.
- It is not the same as the full purchase price of shares.
- If your equity falls below the required level, you may face a margin call or forced reduction.
- Higher volatility or larger positions can mean higher margin requirements.
- Margin increases risk because losses can exceed your initial deposit.
02—How margin works on the PSX
The Pakistan-specific rules, conventions, and numbers.
On the Pakistan Stock Exchange (PSX), regulated leverage is commonly associated with the Margin Trading System (MTS) and broker Margin Financing (MFS), which replaced older carry-over trades. In practice, “margin” is the cover your broker requires to provide that leverage and to manage settlement and market risk while the position remains open.
PSX equity trades settle on a T+1 (one business day) basis and clear through NCCPL, with shares held electronically at the Central Depository Company (CDC). For a leveraged position, your broker will monitor whether your margin remains sufficient as prices move during trading hours. If it does not, you may be required to add cash or collateral promptly to keep the position open.
03—Common misconceptions
Where investors most often get this wrong.
Margin is the broker’s fee or commission.
Margin is a refundable deposit or collateral requirement for leverage. Broker charges are separate items such as brokerage commission and taxes.
If I am on margin, I can only lose my margin amount.
Leverage can magnify losses; losses can exceed the initial deposit. If the position moves against you, you may have to add funds or positions may be closed.
Margin only applies to day trading.
Margin can apply to any leveraged position, whether held intraday or longer, as long as the broker is financing part of the exposure.
04—Using margin on BSL
Where this term shows up across the platform — with live data.
- Understand how leverage works in practice with our guide to Leverage.
- See related PSX mechanics terms like Margin Call to understand what happens when cover falls.
- Explore regulated leverage structures via Margin Trading System.
- Use the Market view to track price moves that can affect margin requirements.
05—Frequently asked questions
What investors ask about margin on the PSX.
Frequently Asked Questions
In Pakistan, margin generally refers to the deposit or collateral your broker requires to open or maintain a leveraged position. It is a risk buffer that helps cover potential losses and supports the financed part of the trade.
It is similar in the sense that it is your upfront contribution, but margin is specifically a collateral requirement for a leveraged position. You are not necessarily paying the full value of the position upfront.
A margin call is typically triggered when losses or adverse price movements reduce your equity in the position below the broker’s required margin level. The broker may ask you to add funds/collateral or reduce the position.
T+1 settlement means trades settle one business day after execution, clearing through NCCPL with holdings at CDC. When you use leverage, brokers still need sufficient cover during price movements and around settlement timelines.
They are not the same. “Margin” is the required cover or collateral, while MTS and broker MFS are regulated frameworks through which leverage or financing may be provided for PSX trading.
06—Related terms
Keep building the picture.
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 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.
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.
The process of completing a trade by transferring shares to the buyer and cash to the seller. The PSX has moved toward a T+1 settlement cycle, meaning most trades are finalised one business day after the trade date.
Shares that the seller does not currently own, with the intention of buying them back later at a lower price to profit from the decline. Heavily regulated in Pakistan and not widely available to retail investors.
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