US
securities regulator today (Wednesday) proposed an amendment to rules that
require broker-dealers to segregate customer funds and securities from their
own assets. Specifically, the Securities and Exchange Commission (SEC)
wants securities trading firms to calculate the net cash owed to customers and
other broker-dealers daily instead of weekly. This cash is required to be held in a special reserve bank
account.
SEC
explained that the purpose of the proposed change is to help broker-dealers
match the amount of cash they owe their customers and external broker-dealers, with the amount they deposit in reserve bank accounts meant for them.
As a
result, the regulator is proposing that broker-dealers with net cash equal to
or more than $250 million must calculate the amount daily and deposit the cash into the reserve by the end of the following business day. The regulator noted that this
will make it less likely that ‘large mismatches will build up over time, predisposing customers to greater losses should a broker-dealer fail.
“Given the
speed, scale, and volume of today’s market activity, I believe customers would
benefit if broker-dealers carrying large credit balances made daily reserve
account calculations and deposits,” noted SEC Chair Gary Gensler. “This
frequency would better align with the inflows, swings, and balances that
broker-dealers experience in today’s markets.”
SEC is
currently collating public comments on the proposal. It noted that it will
gather public options for 30 days after the proposal is published in the
Federal Register.
US
securities regulator today (Wednesday) proposed an amendment to rules that
require broker-dealers to segregate customer funds and securities from their
own assets. Specifically, the Securities and Exchange Commission (SEC)
wants securities trading firms to calculate the net cash owed to customers and
other broker-dealers daily instead of weekly. This cash is required to be held in a special reserve bank
account.
SEC
explained that the purpose of the proposed change is to help broker-dealers
match the amount of cash they owe their customers and external broker-dealers, with the amount they deposit in reserve bank accounts meant for them.
As a
result, the regulator is proposing that broker-dealers with net cash equal to
or more than $250 million must calculate the amount daily and deposit the cash into the reserve by the end of the following business day. The regulator noted that this
will make it less likely that ‘large mismatches will build up over time, predisposing customers to greater losses should a broker-dealer fail.
“Given the
speed, scale, and volume of today’s market activity, I believe customers would
benefit if broker-dealers carrying large credit balances made daily reserve
account calculations and deposits,” noted SEC Chair Gary Gensler. “This
frequency would better align with the inflows, swings, and balances that
broker-dealers experience in today’s markets.”
SEC is
currently collating public comments on the proposal. It noted that it will
gather public options for 30 days after the proposal is published in the
Federal Register.
