Call Money Explained
Call money is a quick loan that needs to be repaid as per the lender's demand, unlike other loans with set repayment schedules.
Details on Call Money
Commonly used by banks and brokerage firms for liquidity, call money's interest rate is called the call loan rate.
Brokerage firms borrow it from banks to fund clients’ margin accounts for credit purchases. Because it can be quickly transferred, it is a highly liquid asset.
When repayment is demanded, brokerage firms might ask clients to sell securities or deposit more cash. This demand, called a margin call, relies on the bank's call loan rate. However, there's a risk involved if the securities' value decreases.