Haircutting

When securities such as stocks and bonds are used as the investment margin, they are discounted at a percentage to determine their collateral value. Discounting these securities by a certain percentage to determine their margin value is referred to as haircutting. This is in contrast to cash where the entire amount of the deposit is used for the margin. If for example, a stock is discounted by 30%, only 70% of the particular stock can be used as margin.