The NSCC has a rule-driven model that tries to make sure that it holds an appropriate amount of collateral for each participant based on risk of default between trade and settlement.
That includes a core capital model that’s derived primarily from value-at-risk based on portfolio size, volatility and the usual things.
It also has an excess capital premium charge which varies according to the extent to which the core requirement is large vis-a-vis a participant’s excess net capital (excess over the minimum regulatory capital required by the SEC); because those are precisely the cases where default is more likely.
In the case of Robinhood, it seems like their internal risk management team had failed to take into account the excess capital premium (which is a large problem on its own), and that premium was particularly large based on how poorly capitalized Robinhood was.
You can go look up details on the NSCC model; it doesn’t care whether your clients are trading on margin.
You really are quite on the wrong side of this discussion: where are you getting your information?
The NSCC has a rule-driven model that tries to make sure that it holds an appropriate amount of collateral for each participant based on risk of default between trade and settlement.
That includes a core capital model that’s derived primarily from value-at-risk based on portfolio size, volatility and the usual things.
It also has an excess capital premium charge which varies according to the extent to which the core requirement is large vis-a-vis a participant’s excess net capital (excess over the minimum regulatory capital required by the SEC); because those are precisely the cases where default is more likely.
In the case of Robinhood, it seems like their internal risk management team had failed to take into account the excess capital premium (which is a large problem on its own), and that premium was particularly large based on how poorly capitalized Robinhood was.
You can go look up details on the NSCC model; it doesn’t care whether your clients are trading on margin.
You really are quite on the wrong side of this discussion: where are you getting your information?