Jeffrey Yao learned the risks of margin trading the hard way. Following a broad market selloff triggered by new U.S. trade tariffs last April, the Vancouver-based IT professional logged into his Wealthsimple online brokerage account to find a message in red letters: He was in a margin call and needed to take immediate action.
Margin trading, by which investors borrow money from brokerages using cash or existing securities as collateral to finance investments, has the potential to significantly enhance returns on assets if they rise in value. But this borrowing can also magnify the extent of losses if an asset’s value falls.
In a market slump, investors can face margin calls – requirements to provide additional securities or cash if the value of the collateral falls below a certain threshold – and possible forced sales of their holdings.
Mr. Yao, fortunately, saw the warning in time.
“I had not used much margin, probably around $10,000,” said Mr. Yao, who considers himself an experienced investor. “I immediately transferred enough funds from my WS chequing account to my WS margin account to bring the margin available above zero.”
While Mr. Yao averted a crisis, a growing number of Canadian investors who have used leverage to try to boost returns may find themselves uncomfortably exposed in an increasingly uncertain market.
New data from the Canadian Investment Regulatory Organization (CIRO) this week showed that Canadians borrowed near record amounts from their brokerages in margin accounts in January, weeks before the outbreak of war in the Middle East. Total client margin debt reported to CIRO by investment dealers stood at $47.3-billion in January, up more than 23 per cent from a year earlier and just $1-million shy of an all-time high in November, 2025.
Leveraged Canadian investors benefited from soaring Canadian stocks last year, but worries over the economic impact of the Middle Eastern crisis have caused markets to tumble this month. The S&P/TSX Composite Index has erased its gains for the year and is approaching a correction, defined as a 10-per-cent drop from a recent peak.
Underscoring rising geopolitical and market worries, one in six global companies responding to an Oxford Economics survey released this week expected a worldwide recession this year. That was “well above their estimate prior to the outbreak of war,” Jamie Thompson, Oxford’s head of macro scenarios, said in a note to clients.
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In its interest rate statement on Wednesday, the Bank of Canada highlighted concerns around weaker economic activity and elevated uncertainty, along with rising inflation risks tied to higher energy prices.
These worries may be elevated for Canadians engaged in margin trading.
“It is fine when things are going well, but the volatility is amplified and you can’t really predict when something’s going to happen,” said Cyrus Kanga, a finance instructor at Camosun College’s School of Business in Victoria and a former head of equities sales trading at Hong Kong-based brokerage CLSA.
The risks for investors using margin trading can be asymmetrical even if markets recover from a slump, he said, noting that investors hit with forced liquidations “don’t get to participate in the rebound.”
Brokerages have nevertheless reported strong demand for margin accounts. In an e-mailed statement, Swapnil Parikh, Wealthsimple’s vice-president of product, said that margin accounts had been “one of the most requested products in Wealthsimple’s history,” and that adoption had been rapid following their introduction on the platform in February, 2025. Wealthsimple joined other brokerages, including TD Direct Investing, Interactive Brokers, Scotia iTrade, Questrade and CIBC Investor’s Edge, that have long offered margin accounts to investors.
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Newer entrants to Canada’s online brokerage market have seized on offering lower margin borrowing rates as a key selling point. In an interview, Michael Arbus, CEO of Moomoo Financial Canada, said that the company’s lower margin rates were “absolutely” a driver of new client registrations, with margin frequently used on the platform by active traders pursuing option strategies that he characterized as “risk mitigants.”
Providing margin to less-experienced investors “is not our intent,” Mr. Arbus said, adding that margin accounts are not a significant driver of profits for the company.
CIRO sets borrowing limits for margin accounts at Canadian brokerages, which may place stricter limits on top of those to protect themselves and investors. Experts say broker margin debt poses a negligible systemic risk at current levels, but increasingly indebted Canadian retail investors could still face significant pressure in a prolonged market downturn.
Canadian household credit market debt, which includes all consumer credit, and mortgage and non-mortgage loans, rose past $3.2-trillion in the fourth quarter of 2025, Statistics Canada data showed this week, up 4.4 per cent from a year earlier. A fifth consecutive quarterly rise in the ratio of debt to disposable income means Canadian households now carry $1.77 in credit market debt for every dollar of disposable income.
“When margin use rises on top of high mortgages [and] consumer debt, households are going to then have less to absorb the losses,” Mr. Kanga said.
“When you do receive that margin call, where are you going to get the money from?”