Posted in Finance, Accounting and Economics Terms, Total Reads: 485
Definition: House Excess
House Excess is the term used to describe the excess amount in margin account which is based on the previous day closing price of the stock held in portfolio. To understand this we have to look into margin trading.
In margin trading the investor has to open a separate account called the margin account. This helps the investor to borrow money from the brokerage and invest in stock. The investor can borrow money up to 50 percent of the amount to be invested. The portion of the purchase price initially deposited is called the margin requirement.
The margin requirement is dynamically managed. The investor also has to maintain a minimum maintenance margin and once it falls below the minimum, the broker will force the investor to refill the account. Thus the amount in excess of maintenance margin and is available to the investor for investing is called as house excess.