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The Margin Investor

Regulatory Timeline

Risk based alternatives to Reg T have been in the works for well over a decade. During the 1990's US regulators, exchanges, and exchange members came to recognize that Reg T margin requirements were often excessive relative to the risk of the positions under consideration. At the same time, advances in portfolio risk management technology and quantitative models made risk-based margin systems a practical alternative. 

In an effort to become more globally competitive and to stem the flow of capital to off-shore brokers, US regulators finalized approval of Portfolio Margining in 2007.     
Federal Reserve
Options Clearing Coroporation
Securities and Exchange Commission
New York Stock Exchange
Chicago Board Options Exchange
Financial Industry Regulatory Authority

1998
The Federal Reserve amends Reg T to allow broker-dealers to apply "Portfolio Margining" to client margin accounts. Implementation of Portfolio Margin is subject to final approval of an exchange's portfolio margining rules by the US Securities and Exchange Commission.  

2002
In an effort to be more competitive globally, the NYSE pursues SEC approval to initiate a pilot program for portfolio margin. The program aims to test portfolio margin in a controlled fashion with a restricted set of products and accounts. The SEC publishes the NYSE's proposed portfolio margin rules in order to seek public comment.

2005
The SEC approves a two year NYSE pilot program for portfolio margin. The program covers listed broad-based index options, index futures, futures options, and ETFs.

2006
The CBOE applies to the SEC and gains approval for inclusion in the portfolio margin pilot program. This move expands product coverage to equities, equity options and single stock futures. The SEC mandates the use of the Options Clearing Corporation's TIMS (Theoretical Intermarket Margining System) methodology to set portfolio margin requirements. 

2007
The pilot program is extended and the NYSE and CBOE gain SEC approval for broader implementation of Portfolio Margin. Any broker-dealer registered pursuant to Section 15 of the Exchange Act, and any person or entity approved for uncovered options is eligible for portfolio margin. 
Several broker-dealers begin offering portfolio margin accounts.

2008
FINRA ends the pilot program by making portfolio margin permanent. FINRA sets guidelines on net equity minimums for Portfolio Margin accounts at member broker-dealer firms: $100,000 for brokers with real-time margin capabilities, $150,000 for brokers without real-time margin capabilities, $500,000 for prime brokerage accounts where trades are executed.

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