Margin Rules and Margin Trading: Past, Present, and Implications

Zhuo Chen, Zhiguo He () and Wei Wei ()
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Zhuo Chen: PBC School of Finance, Tsinghua University, Beijing, China
Wei Wei: Graduate School of Business, Stanford University, Stanford, California, USA

Annual Review of Financial Economics, 2024, vol. 16, issue 1, 153-177

Abstract: Margin—collateral or funds that investors deposit with their counterparties—is a crucial component of the practice of borrowing money to fund investment. While margin offers the potential for enhanced returns, it also exposes investors to the risk of escalated losses, thereby necessitating stringent regulatory oversight. Delving into the regulatory framework governing margin trading, we provide historical insights into the origins and dynamics of various margin requirements, and we review academic studies that illuminate the implications of these regulations for asset pricing, financial stability, and the design of margin rules. With an eye to the future, we also outline recent advancements in the evolving landscape of margin rules, such as portfolio margin and central clearing.

Keywords: margin rules; asset pricing; financial stability; margin trading; central clearing (search for similar items in EconPapers)
JEL-codes: E44 E50 G01 G12 G18 G21 G23 G24 G28 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1146/annurev-financial-110921-102509

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