https://www.sec.gov/files/rules/other/2026/34-105108.pdf
Hey y'all I posted this link in another thread and some people seem to think it's not a big deal, or too narrow to have an impact in the market. I'm not a regulatory expert, but it seems this new rule allows brokers to collateralize short term borrowing (designed for covering short sales and FTDs) with equities instead of holding cash equivalents. Is anyone able to make an assessment of the risk here?
My layman understanding is that this is a move to get cash from the sidelines into the market, but what happens during a large margin call event? My fear here is that a swift enough price shock leads to a decoupling of equity price and borrowing margin without cash being available to cover, forcing additional equity sales and fulfilling more shorts (doomloop scenario).
If anyone has more insight or an explanation of this rule change I'd love to learn more, thanks!