CHICAGO, March 30 (Reuters) - Fimat Group, parent of Fimat USA, LLC, said on Friday it received regulatory approval from the New York Stock Exchange NYX.N to begin offering portfolio margining to qualified clients when the U.S. Securities and Exchange Commission rule change takes effect on April 2.
Fimat USA, the brokerage arm of French bank Societe Generale (SOGN.PA), has been an active player in introducing a change in margin rules under a SEC pilot since December 2005.
Portfolio margining calculates the margin requirements for all positions related to an index or an individual equity in an account based on the risk of that portfolio. It differs from the historic strategy-based approach in the U.S. securities world where margin rules are on individual positions.
The SEC last year approved the use of a portfolio risk-based method to calculate margin rules for broad-based index options, corresponding Exchange Traded Funds, equity options and their underlying equities.
Both the NYSE and Chicago Board Options Exchange pushed the SEC to broaden the coverage of margin rules, which they viewed as more efficient for markets and attractive to investors since it will free up more capital.
Thomas Kloet, senior executive vice president and chief operating officer, Fimat USA, believes portfolio margining is a factor that should support growth in the U.S. options market.
Options volume is already booming, underscoring investors’ appetite to use these products to manage portfolio risk or to generate income against a background of increased stock market volatility.
As trading came to a close on Friday new monthly and quarterly options trading records were set. About 228 million options contracts changed hands in March, nearly 40 percent more than March 2006 and 15 percent higher than the previous record set last May, according to the Options Clearing Corp.
The first quarter saw almost 610 million options contracts traded at a pace of more than 10 million contracts per day, some 25 percent better than the 2006 rate of 8 million contracts per day, OCC data figures showed.
The implementation of these new rules will increase the participation in the equity options markets, Fimat’s Kloet said in a telephone interview.
“Hedge funds and other institutional market participants who pay very close attention to the allocation of their capital will benefit,” Kloet added.