What triggers a margin call in trading?

A margin call occurs when the value of the securities in a trading account falls below a certain threshold, prompting the brokerage firm to request additional funds to cover the declining equity in the account. The correct choice highlights that a decrease in the value of invested securities directly affects the margin level, which is the equity that an investor maintains in their position versus the amount borrowed from the broker. When this equity falls below a specific percentage required by the brokerage, a margin call is initiated, requiring the investor to deposit more money or liquidate some positions to meet the margin requirements.

In contrast, exceeding purchase limits typically refers to restrictions on the number or amount of securities that can be bought and does not directly influence a margin call. The failure to execute orders on time pertains more to trading performance and does not impact the margin level itself. Increased transaction volume may indicate higher trading activity but does not trigger a margin call unless it affects the value of the securities held on margin. Therefore, the decrease in the value of invested securities is the key catalyst behind a margin call.