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Huge Reduction in Capital Required"This is one of the biggest fundamental changes to occur in
- Removing the $5 million account minimum, but most brokers still can impose their own minimum account balances and trading experience thresholds. Brokers such as ThinkorSwim and OptionXpress will apply requirements, such as being allowed to sell naked or short uncovered options. Typically, that means about $100,000 and level five trading approval.
- Portfolio margining will be expanded to include all equities and their related options, not just index products. It also will allow some cross margining of "highly correlated products." For example, options on the S&P 500 Index can be offset with options on the SPDR Trust (SPY). It will also include some similar futures contracts, and there will no longer be a need to have a separate cross-margining account.
- Allows margin deficiencies to be resolved in three business days instead of the current one day. Won't that be great be when your margin clerk calls to tell him, "I'll get back to you in a few days"?
- Brokerage firms will need to upgrade their margin-tracking systems -- implementing real-time monitoring of margin requirements, reconfiguring the stress tests or percentage moves from which margins are calculated, and initiating plenty of internal controls -- which must be approved by the NYSE, the Designated Examining Authority (DEA), before they can offer portfolio margining to their customers.