(July 24 – 14:15 ET) – The Investment Dealers Association has approved rule changes governing cash accounts. The cash account rule requires that overdue cash accounts be margined as a margin account after the settlement date plus six business days.
The rule requires that the account be marked to market based on a weighting of the market value of securities available to support the cash account debit balance. Securities with a margin rate of 60% or less are weighted at 100%. Listed securities with a margin rate of greater than 60% are weighted at 33.3%, including NASDAQ National Market and SmallCap Market securities. All other securities with margin rate of greater than 60% (including OTC securities) get a weighting of zero.
For determining margin deficiencies for clients on a trade date basis, the amount of margin required between trade date and settlement date will continue to be the equity deficiency. This is calculated as the difference between the net market value of all trade date security positions and the trade date money balance.
The new system will be phased in by December 1. Testing will start October 1 and will run until November 30. A Safe Harbour period will exist between December 1 and Jan. 31, 2001. During this period firms should be using the new rule in their capital calculations, however they will not be charged with a capital deficiency or be deemed to be in Early Warning if such a deficiency is due to the new rule.
-IE Staff