15c3

Prime Brokerage Anatomy™ →Go uptown There is no industry standard prime brokerage agreement, so this is not so much an anatomy as a collection of resources about an amorphous subject. Hedge fund | AIFMD | Depositary | Prime broker | prime brokerage agreement | synthetic prime brokerage | margin lending | custody asset | CASS Anatomy | reuse & rehypothecation | hedge fund | leveraged alpha | greeks | short selling Index: Click ᐅ to expand: Prime Brokerage Securities Financing Investment Strategies Tell me more Sign up for our newsletter — or just get in touch: for ½ a weekly 🍺 you get to consult JC. Ask about it here.

The Securities Exchange Act’s vaunted Rule 15c3, “Customer protection - reserves and custody of securities” was enacted in 1972 with the intention to protect client accounts at brokers following the 1968 Wall Street Paperwork Crunch — a financial markets disaster which curiously doesn’t get a lot of play these days even though it caused firms to fail and clients to lose money.

15c3 requires[broker-dealer]]s to segregate a portion of their cash and securities and keep them in protected accounts from which clients can withdraw their holdings on demand, even on insolvency of the broker-dealer.

Broker-dealers must, weekly, calculate what they and their clients owe each other and where the customer is a net creditor, lock up a portion in a “special reserve bank account for the exclusive benefit of customers.”

It's like a capital buffer.

Just the bit — 15c3-3 — that talks about rehypothecation (well it may do — personally i lost the will to live with 9 page definition of “Customer”) runs to 200 pages. Have fun.