The Securities and Exchange Commission (SEC) approved a proposal to align the minimum margin on security futures with other financial products that are similar.
The proposed rule sets the minimum margin requirement for security futures at 15 percent of the current market value of each security future.
The SEC and the U.S. Commodity Futures Trading Commission (CFTC ) have joint rulemaking authority related to margin requirements for security futures. Thus, the CFTC needs also to approve the rule change.
The CFTC is scheduled to vote on the proposal this week. If the CFTC votes in favor of the proposal, it will then be published in the Federal Register. At that point, the proposal will be open for public comment for 30 days after it is published in the Federal Register.
The rule change came about because the minimum requirement for these securities is higher than others. Both the SEC and the CFTC adopted rules in 2002, establishing margin requirements for unhedged security futures products at 20 percent.
For 17 years, lower margin requirements have been established for comparable financial products and the resulting asymmetry and the SEC decided that it is appropriate to re-examine the minimum margin required for security futures.