Margin buffer

With a margin loan, you are given a limit to the amount you can borrow (your loan limit). You are allowed a small buffer (for example 10%). If the value of the investment portfolio held as security for your loan falls, the loan limit falls, and so does the value of the buffer. If you borrow more than your buffer you are subject to a margin call.

Amy's buffer means small falls in the market won't result in a margin call

	Scenario 1: portfolio drops by 11% $	Scenario 2: portfolio drops by 26% $
Amy's original portfolio value	36,000	36,000
New market value of Amy's portfolio	32,040	26,640
Loan limit (new maximum amount Amy can borrow)	(61.1%) 19,576	(61.1%) 16,277
Loan balance (what Amy currently owes)	(62.5%) 20,000	(75.19%) 20,000
Total buffer allowable if the buffer is 10% of the market value of the portfolio	3,204	2,664
Buffer used (difference between the loan limit and the loan balance)	-424	3,723
	Remaining buffer 2,780	Margin call 1,059

Scenario 1 - in the buffer

As Amy's account is still in the buffer, it is not necessary for her to take any action but she can't borrow any more than $2,780.

Scenario 2 - below the buffer

Amy's loan limit has dropped below her outstanding balance by more than the buffer, so she is subject to a margin call.

How is the buffer set?

A portfolio buffer ensures that small falls in the market don't result in a margin call.

The size of the buffer varies with different margin lenders. With BT Margin Lending, the buffer is 10% of the total value of approved securities in your loan portfolio.

Find out more about BT's margin lending.

Download a copy of 'Margin lending made easy' (PDF, 557 KB).
Read BT's margin lending case studies.
Find a financial adviser using BT's Adviser Referral Program.
Learn about BT's margin loans.