Portfolio Margining: Risk-Based TIMS Model vs. Strategy-Based Margin
How does portfolio margin differ from traditional Strategy-Based (Regulation T) margin for eligible high-net-worth and institutional retail investors under FINRA Rule 4210?
Portfolio margin uses quantitative risk models (OCC TIMS) to set margin based on net hedged portfolio risk, providing greater leverage and lower margin for hedged accounts than Reg T.
Complete Analysis & Legal Rationale
Under FINRA Rule 4210(g), approved customers who maintain at least $100,000 in equity ($150,000 or $500,000 for certain accounts) can utilize Portfolio Margin instead of Strategy-Based Reg T margin. Portfolio margin uses the OCC's Theoretical Intermarket Margining System (TIMS) to evaluate the net simulated market loss across a range of price changes (+/- 15% for broad indices). Well-hedged portfolios receive dramatic margin reductions compared to fixed Reg T formulas.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
Portfolio margin uses quantitative risk models (OCC TIMS) to set margin based on net hedged portfolio risk, providing greater leverage and lower margin for hedged accounts than Reg T.
Fails to adhere to margin rules for B.
Fails to adhere to margin rules for C.
Fails to adhere to margin rules for D.
Official Standard: Under FINRA Rule 4210(g), approved customers who maintain at least $100,000 in equity ($150,000 or $500,000 for certain accounts) can utilize Portfoli