Tim Fries, 22 April 2021
Having the collateral to cover stock trading is important to oil the market cogs. With margin trading, it is critical, a lesson learned the hard way from “Bill” Hwang last month. From today, the SEC will decide which brokerages failed to cover their securities trading, and what punishments it will dish out.
What is SEC Rule 15c3-3?
Even free market absolutists understand that rules of the playing field have to be followed to maintain the ecosystem. The U.S. Securities and Exchange Commission (SEC) is the final arbiter in this arena. Although this regulatory agency too suffers from the “revolving door” syndrome, on paper, the SEC is in charge of ensuring market participants play fairly.
While not a legislative body, the SEC’s interpretation of the existing securities laws in the form of issued rules do have the same heft. One of those rules had been issued in 1972 (amended multiple times since) – Rule 15c3-3 – also commonly called the Customer Protection Rule as a part of the Code of Federal Regulations.