I have seen huge difference in margin requirements among different brokers for the same trade/position. I understand the argument - different brokers has different risk management. But apart from risk is there any other advantage for broker or its clearing firm to use/block more buying power ? For example - can they earn interest on BP that is blocked ? Or can they use this BP - to lend money to other clients ? I have seen more than 3 times difference among brokers for relatively non volatile stock - so wondering real intention behind this type of aggressive policy?
Margin requirements for securities and options are antiquated. They are basically one set of rules that fit all while the CME for futures, takes into account current risk per product. The OCC, the counterparty for all options, is starting to realize they are antiquated too. They have one set of requirements for a stock like AAPL and the same for Small cap stocks and meme shares. The OCC requires their members to have higher requirements for volatile symbols but provides little guidance. That is why one Broker will require one house rule and another is different. It is 100% for risk to protect the clearing members and the OCC from large losses.
Like in any arena competition in requirements between brokers and regulatory authorities is a good thing.
So I am still not clear - there is no advantage for brokers or clearing members to block higher BP- other thank risk ?
One broker - thinks its 3k risk and other broker thinks it is 8k risk - on the same stock - same day ...amazing - I think there should be some regulation about this...I have seen most free brokers have higher margin requirements - that is why I asked if they make money indirectly by blocking more margin/BP. Sometimes I wonder - why there is so much green on brokers part - Just float income itself is quite substantial plus they have volume discount or exchange rebates and of course PFOF - but brokers want money for everything - data/commissions - want to charge very high marked up interest on margin ... Broker themselves are banks - where they keep your idle money and give little or no interest and can make huge money on that idle money of yours.