Maintenance Margin
The minimum balance that must be maintained in a trading account after opening a futures position; if the account falls below this level due to adverse mark-to-market movements, a margin call is triggered requiring the trader to restore the account to the initial margin level.
Once a futures position is established and the initial margin is deposited, the account balance changes daily as variation margin credits or debits flow through. The maintenance margin is the floor below which the account balance must not fall. On NSE and BSE, the distinction between initial and maintenance margin was less formalised than on international exchanges like CME — effectively, the SPAN and exposure margin together served as the combined initial and maintenance margin threshold, and any depletion below this level constituted a margin shortfall.
In the international context, particularly in US futures markets, the maintenance margin was typically set slightly below the initial margin (often at 75-80 percent of initial margin). The gap provided a buffer so that minor adverse moves did not immediately trigger margin calls. In India's framework under SEBI's peak margin rules, however, the full initial margin had to be present at the time of each intraday snapshot, blurring the practical distinction between initial and maintenance margins.
From a trader's practical standpoint, the maintenance margin concept still held relevance. When variation margin debits eroded the available balance, the broker's system flagged the shortfall and sent a margin call — a notification requiring additional funds to be deposited by a specified time, typically before the start of the next trading session. If the trader failed to respond, the broker was permitted to square off the position to the extent necessary to bring the account into compliance.
For institutional participants managing large portfolios, monitoring the ratio of mark-to-market losses to initial margin was a standard risk metric. A portfolio whose cumulative MTM losses approached 80-90 percent of the initial margin was considered at elevated risk of a margin call, prompting pre-emptive position reduction or additional collateral deposit.
The maintenance margin concept reinforced the self-liquidating nature of exchange-traded futures. Unlike over-the-counter derivatives where exposure could accumulate unchecked between bilateral settlements, the daily variation margin and maintenance margin requirements ensured continuous alignment between market risk and posted collateral.