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Section: 7 Trading on Exchanges
Sub Section: 7 Buying on Margin
Purchasing stocks on margin means the investor borrows part of the purchase price
of the stock from a broker. The brokers in turn borrow money from banks at the
call money rate to finance these purchases; then they charge their clients the
interest payable to the bank, plus a service charge for the loan. All securities
purchased on margin must be maintained with the brokerage firm, for the securities
are collateral for the loan.