When the minimum margin deposit for a short sale is less than $2,000, what requirement must be met?

In the context of short selling, the minimum margin requirement is critical to ensuring that the brokerage is protected against potential losses. According to the rules established by the Financial Industry Regulatory Authority (FINRA), when the minimum margin deposit for a short sale is established, if that amount is less than $2,000, the short seller is still required to deposit the full $2,000.

This requirement is in place because it provides a safety net for brokers, ensuring that there is adequate capital to cover potential losses that can occur from a short sale. If the market moves against the short position, the full deposit helps mitigate the risk of default. Even if the minimum calculated amount is lower due to the share price or other factors, the rule mandates the full $2,000 to be deposited as a standard minimum threshold for risk management purposes.

In situations where the deposit is lower than this threshold, it does not relieve the trader from the obligation to maintain the minimum deposit amount, hence the necessity of the full $2,000 in funds. This rule promotes market stability and safeguards both the brokerage and the investor involved in short selling.