What is the interest rate called when a broker-dealer borrows money to fund margin purchases?

The interest rate charged when a broker-dealer borrows money to fund margin purchases is called the broker call loan rate. This rate is significant in the context of margin trading, as it directly impacts the costs associated with borrowing funds to purchase securities on margin. When an investor buys securities on margin, they are essentially borrowing money from the broker to finance part of the purchase. The broker, in turn, often borrows funds from banks or other financial institutions, and the broker call loan rate represents the interest rate that the broker incurs for that borrowing.

This rate can fluctuate based on broader economic conditions and interest rates in the financial marketplace. Understanding this rate is crucial for investors engaged in margin trading, as it affects overall expenses and potentially impacts profitability when leveraging investments.