Bye-bye reg T

Quote from Il Principe:

Everything has changed. Every nook and cranny of this gigantic English Muffin that we call Trading has been arb'd, what-if'd, stat-mined, spread, re-packaged and regurgitated. There's nothing left to generate outsized returns. Traders have peaked as a skilled group. So, bump the leverage; more dollar power for all. Just wait until some mega-watt vol rips into the market, boy howdy.
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Do you know that some prominent British scholar said in early 1900 that there was nothing else left to invent.

This argument has been used 20 years ago and will be used 20 years later. There are tons of opportunities in the markets.
 
Quote from Avid_Consumer:

did something change, do the reasons reg T was initiated following the 1929 crash no longer apply?
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Since 1982 "investors" have been able to trade large baskets of stocks at 10-1 margin (futures) anyways. It's doubtful that the NYSE or SEC are going to allow Ma and Pa Retail to swing IBM at even 5-1 overnight.

What WILL be allowed is the opportunity for someone to sell HON calls "naked" short against a long position of GE without having to fully margin each position. The equity trading world will essentially become one big SPAN. Just like futures. Just like foreign exchange. Just like Treasuries. Fair enough.
 
this would level the playing field. big funds and big banks will no longer have a free lunch. they are going to have to be more creative, faster and smarter. they just can't hold onto positions until they work out just because they have all the margin and money anymore. they will not be the only ones being able to step up and take the risk when it is obvious the market is extended, especially in options. niches will be everywhere. the only people that would be afraid or lose if an increase in volatility is the ones that are short options. everyone else would welcome it. so, just like any event in the market, there is winners and losers. same with a crash. with the field leveled you don't have to be in the lucky sperm club or work for backers that promise the world but never deliver to be creative and exploit niches.
 
maybe i've got the beneficiaries wrong, i'm totally into leveling the field, but more institutionalized strongarm doesn't seem like a good thing at first blanche, likewise one more layer of lev fighting for the same tick, or leverage abstracting whatever fundamental reality remains. i thought this was for the specialists/floor brokers to trade more size, or are they just hoping to generate more retail flow?

will try and track down a wsj article if there is one. i need to read up on span too

as someone who uses lev really conservatively, just seems like more systemic risk intended to keep the inflationary trend aloft
 
Quote from Avid_Consumer:

did something change, do the reasons reg T was initiated following the 1929 crash no longer apply?
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Yes. Where have you been? Trapped in a cave for a generation?

Computers have replaced pencils...
And risk management on the clearing firm and broker-dealer level is infintely more sophisticated.

Reg T has been a total joke for decades...
And, as someone said, it's reached the point where BIG MONEY is flowing to Europe and Asia...
Because of archaic US regulations.
 
From the article:

"The US is set to relax margin rules in force since after the Wall Street crash of 1929 with the approval of a system that <b>will cut securities trading costs</b> and pave the way for "multi-asset" trading across equities, options and futures."

What does it mean when it says the new margin rules <b>"will cut securities trading costs"?</b> How does that work?
 
Quote from HoundDogOne:

Yes. Where have you been? Trapped in a cave for a generation?

Computers have replaced pencils...
And risk management on the clearing firm and broker-dealer level is infintely more sophisticated.

Reg T has been a total joke for decades...
And, as someone said, it's reached the point where BIG MONEY is flowing to Europe and Asia...
Because of archaic US regulations.
More...

it was a totally rhetorical question, bit too subtle i guess.

a market composed almost entirely of money that doesn't exist will never be anything but that, regardless of the 'infinitely more sophisticated' risk mgmt you apply to it. if you're a cost driven edge aka comms and margin can destroy or make your business, then i can see why you would desire it

it has the potential to improve immediate opportunities for both brokers and good traders, but that doesn't make it the right thing to do by default.

what did we go, from 53 to 96 trillion notional derivatives exposure according to BIS between 04 - 05? i'm afraid to see where it is now. do whatever you think you need to keep your business good, but dont say i didnt warn ya
 
Thanks for sharing that info, Maverick. Do you know if they will also provide relief if you are market neutral, like holding $100,000 long equities, and $100,000 short equities simultaneously, without any options being in your account?
 
When will these rules go into effect?

Will future-equity hedges have reduced margins? If I am long ZN and short TLT (not exactly the same things, but very close), will the margin be lower as it should be?
 
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