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Good faith deposit

Definition:

Used in the context of commodities. Refers to the initial margin account deposit needed when buying or selling a futures contract; approximately 2%-10% of the contract value.
Used in the context of securities to describe the deposit required by securities firms engaged in transactions on behalf of a new client.
Also used to refer to the deposit with a municipal bond issuer by firms competing for the underwriting business.

Investing Essentials


Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

Term of the Day

Post

Particular place on the floor of an exchange where transactions in stocks listed on the exchange occur.

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