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Quantitative Finance · Begrippenlijst

Wat is Net capital rule?

Definition 2.5 The Desk and the Firm · Hoofdstuk 2 — The Proprietary Market-Making Firm

The net capital rule is the United States requirement that a broker-dealer keep its net capital, its net worth less illiquid assets and less haircuts on its positions, above a floor set by its business and by its indebtedness or its customers’ debits.

The chapter’s firm (fixed overheads $95 million a year, $10 billion a day of cash trades): the three parts of the European own funds requirement, K-DTF if the same flow were derivatives, and the trading capital its prime brokers require. The regulatory requirement is the largest of the first three; the prime brokers’ is eight times it. Coefficients: Regulation (EU) 2019/2033; firm parameters illustrative. Data: fm_partner.regulatory.
Figure 2.2. The chapter’s firm (fixed overheads $95 million a year, $10 billion a day of cash trades): the three parts of the European own funds requirement, K-DTF if the same flow were derivatives, and the trading capital its prime brokers require. The regulatory requirement is the largest of the first three; the prime brokers’ is eight times it. Coefficients: Regulation (EU) 2019/2033; firm parameters illustrative. Data: fm_partner.regulatory.
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