There are many benefits to an Institutional Firm trading under Portfolio Margin rather than in a JBO (Joint Back Office)
- An Institutional entity trading with Portfolio Margin is not subject to the substantial risks inherent in a co-mingled JBO arrangement
- Portfolio Margin haircut requirements are similar to those of a Broker-Dealer under rule 15c3-1
- There is NO "lock-up" in an Institutional account whereas a JBO requires an initial 365 day lock-up
- Industry leading execution systems / front ends are available - you're not limited to the systems used by your JBO
- Volume based option exchange fees are typically free as a Customer
- NO fixed exchange membership costs
- Professional Customers are NOT subject to PFOF (Payment for Order Flow)
- Greatly simplified regulatory environment, NO WSPs, Required Audit, compliance staffing / requirements, etc
- SEC rule 15c3-3 the "Customer Protection" rule protects Institutional Investor Assets, though not your assets in a JBO
Click for: VICTOR - Institutional v. JBO analysis
There are many benefits for an Institutional Firm trading as a Professional Customer rather than as a Broker-Dealer or Market-Maker
- Volume based option exchange fees are typically lower or in some cases zero as a Professional Customer NO fixed exchange membership costs
- Greatly simplified regulatory environment and reduced staffing: Institutions DO NOT have WSPs, Required Audit, compliance costs
- Professional Customers are NOT subject to options PFOF
- Able to enter 2-sided quotes similarly to traditional Market Makers
- SEC rule 15c3-3 the "Customer Protection" rule protects Institutional Investor Assets, though not YOUR assets in a JBO
Click for: VICTOR - Pro Customer v. Market Maker analysis
See the below links for FINRA and CBOE guidance on Master and Sub-Accounts:
Click for: FINRA Regulatory Notice 10-18
Click for: CBOE Regulatory Circular RG10-101