What is the typical margin requirement on domestic security loans?

The typical margin requirement on domestic security loans is often set at 102%. This means that when borrowing against securities, an investor must maintain equity in the account equivalent to 2% more than the loan amount. The additional 2% acts as a buffer to protect the lender against fluctuations in the value of the securities during the lending period. It ensures that the borrower has a certain level of equity to absorb potential market volatility, thereby reducing the lender's risk.

In the context of margin trading, these requirements help maintain stability in the financial system, as they prevent excessive leveraging by investors, ensuring they have skin in the game. This safeguard is crucial in maintaining the integrity of the borrowing process in stock markets, as securities can fluctuate in value, leading to risks that could otherwise undermine both the lender and borrower if margin requirements were not adequately set.