8 replies to this topic

[jjc]

SEC Approves Relaxing Margin Requirements -- January 10, 2007

New portfolio margin account rules will go into effect in April 2007

Margin requirements--what's changing?

The new portfolio margining rules relax requirements that have been in place for decades. Existing rules base initial margin requirements on set percentages for specific types of securities or strategies. For example, to buy stocks on margin, an investor would have to deposit 50% of the value of that stock in the margin account. These percentages do not take into account whether the risk of one type of investment helps offset the risk of a related security.

By permitting portfolio margin requirements to be applied across multiple types of assets and tying initial margin requirements to a security's historical price performance, the new rules should make trading on margin more accessible to a broader range of investors.

On December 12, 2006, the Securities and Exchange Commission (SEC) approved a new method of calculating margin requirements for options trading in brokerage accounts.


Operation Date: 04/18/2007
Operation Type: Outright TIPS Purchase
Release Time: 10:45 AM
Close Time: 11:15 AM
Settlement Date: 04/19/2007
Maturity/Call Date Range: 01/15/2008 - 04/15/2032
Total Par Amt Accepted (mlns) : $560
Total Par Amt Submitted (mlns) : $6,159

Operation Date: 04/10/2007
Operation Type: Outright Coupon Purchase
Release Time: 10:45 AM
Close Time: 11:15 AM
Settlement Date: 04/11/2007
Maturity/Call Date Range: 11/15/2015 - 11/15/2021
Total Par Amt Accepted (mlns) : $835
Total Par Amt Submitted (mlns) : $10,492

Operation Date: 04/09/2007
Operation Type: Outright Coupon Purchase
Release Time: 10:30 AM
Close Time: 11:00 AM
Settlement Date: 04/10/2007
Maturity/Call Date Range: 08/15/2011 - 08/15/2015
Total Par Amt Accepted (mlns) : $1,011
Total Par Amt Submitted (mlns) : $10,149

[SandStorm]

My understanding is that the new rules will reduce your margin buying power vs old rules if your strategy is mostly directional. It's best elected if you hedge your bets a lot.

[Long/Short Funds]

That was nice of them,,,,, increase everyone's line of credit in order to bring more money to the playing table ...

[jjc]

That was nice of them,,,,, increase everyone's line of credit in order to bring more money to the playing table ...

Part one create a path to the part of the system you need to pump up, part two add more money to
the system.

I'm no expert; Perhaps we can get some more comments from those that are.

[jjc]

My understanding is that the new rules will reduce your margin buying power vs old rules if your strategy is mostly directional.

It's best elected if you hedge your bets a lot.

I suspect that the rule is taylored to large institutional money, but I am no expert. I appreciate
any and all comments. thanks.

[dasein]

we covered this topic some tie ago here on TT - there were similar misapprehensions and faith-based conclusions... rather than do it again, you might do a search. best, klh

[jjc]

we covered this topic some tie ago here on TT - there were similar misapprehensions and faith-based conclusions...

rather than do it again, you might do a search.

best,

klh

Thanks. Dasein.

and to all interested here is a thread:
http://www.traders-t...?...ments&st=10

What is new of course is the POMOs and the daily REPOS; I'm not making any predictions of a future FED PUT here; just pointing out that it is possible the POMO money went directly into the stock market via
non-directional bets.

Might explain P/C ratios; Record high Margin on Nasdaq; and a very Strong April in stocks all while there is/was Low NYSE volume.

This is not a prediction of future stock prices... My rants here are an attempt to figure out how this
boxed in FED works;

[SandStorm]

My understanding is that the new rules will reduce your margin buying power vs old rules if your strategy is mostly directional.

It's best elected if you hedge your bets a lot.

I suspect that the rule is taylored to large institutional money, but I am no expert. I appreciate
any and all comments. thanks.

I trade with IB and this is what they said more specifically regarding port margin.

http://www.interacti...p?ib_entity=llc

It's an option at this point and I will not "upgrade" because I only trade ultra high-beta stocks in few concentrated sectors.

Hope this helps.

[SandStorm]

One thing I will like to add is that this new rule gives quants and arbs more power as if they don't already have enough. Nickles and dimes aren't much but they add up quickly to 30, 40, 50% annual returns by using extreme leverage and picking up discrepancies here and there. Soon they will grow bolder, acquire illusion of invincibility, and use even more leverage. Then -- WHAM BANG -- what are supposed to converge, diverge just a little wider and stay that way just a little longer than theoretical models suggest, Alas, it's LTCM style blowup again only this time we have 10s of them. Heaven help us.