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SEC proposes minimum security futures margin requirement to be 15%

Redwan Eid | Jul. 4, 2019
SEC proposes minimum security futures margin requirement to be 15%

July 4, 2019 | AtoZ Markets - The regulator proposes to align the minimum margin required on security futures with other similar financial products.

The United States Securities and Exchange Commission (SEC) has published a new proposal with regard to the minimum security futures margin.

On Wednesday, the commission set a rate of 15% for the current market value of each security future, in pursuits to align the minimum required on security futures with other similar financial products.

While the Commodity Futures Trading Commission (CFTC) has not voted on the suggestion yet, it is a partner decision maker with regard to the margin requirements for security futures.

“The Commodity Futures Trading Commission (“CFTC”) and the Securities and Exchange Commission (“SEC”) (collectively, the “Commissions”) are proposing amendments to regulations that establish minimum customer margin requirements for security futures. More specifically, the proposed amendments would lower the margin requirement for an unhedged security futures position from 20% to 15%, as well as propose certain revisions to the margin offset table consistent with the proposed reduction in margin.” Said the SEC in its notice.

The margin requirements were at 20% 

In retrospect, the CFTC and the SEC, both set the rate at 20% as for the margin requirements for unhedged security futures products in 2002.

Today, the SEC sees that the currently adopted lower margin requirements comparable financial products need to be changed, in the light of the real results produced on the ground.

The SEC also proposes specific revisions to the margin offset table consistent with the proposed reduction in margin.

The SEC believes that the unhedged security futures margin rate must not be lower than 15%. Therefore, to make it comply with the statutory requirement, where the margin level for a security future be consistent with the margin for any comparable exchange-traded option.

In a disconnected news, the SEC, which keeps toughening its grip regulation-wise, recently brought fraud charges against Worldwide Markets, Ltd., registered in the British Virgin Islands, and the company’s CEO Thomas Plaut.

Worldwide Markets used its clients’ deposits for undisclosed purposes, such as financing other business lines and reimbursing employees. Despite promises that withdrawals from customers will be processed within two business days, Worldwide Markets has allegedly not satisfied any withdrawal requests since 2017, as AtoZ Markets reported.

Disclaimer: The views and opinions expressed in this article are solely those of the author and do not reflect the official policy or position of AtoZ Markets.com, nor should they be attributed to AtoZMarkets.