# Can a Prime Broker Rehypothecate Fully Paid Securities under SEC Rule 15c3-3? ▴ Question

**Published:** 2025-08-02
**Categories:** Question

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## Concept

The architecture of [client asset protection](https://prime.greeks.live/area/client-asset-protection/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) within the U.S. financial system is built upon a clear and deliberate design. At its core, the question of whether a prime broker can rehypothecate fully paid securities under SEC Rule 15c3-3 receives a direct and unambiguous answer ▴ No. This prohibition is a foundational element of the [Customer Protection Rule](https://prime.greeks.live/area/customer-protection-rule/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), a regulatory framework engineered to create a robust separation between a broker-dealer’s assets and the assets of its clients. The rule mandates that securities fully paid for by a client are to be segregated and held in the broker’s possession or control, effectively creating a “lock box” to shield them from the firm’s operational and financial activities.

This absolute protection of [fully paid securities](https://prime.greeks.live/area/fully-paid-securities/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) stands in contrast to the treatment of “[margin securities](https://prime.greeks.live/area/margin-securities/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite),” which are those purchased by a client using credit extended by the broker-dealer. In a margin arrangement, the client has a debit balance, and the securities in the account serve as collateral for this loan. SEC Rule 15c3-3 permits a broker-dealer to rehypothecate, or re-pledge, a portion of these margin securities. This practice is not unlimited; the value of the rehypothecated securities cannot exceed 140% of the client’s debit balance.

This distinction is critical. The ability to rehypothecate margin securities provides broker-dealers with a necessary tool for financing and liquidity, while the stringent prohibition on rehypothecating fully paid securities ensures that clients who have fully met their payment obligations are not exposed to the risks of the [broker-dealer](https://prime.greeks.live/area/broker-dealer/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite)’s business activities.

> SEC Rule 15c3-3 establishes a critical distinction between fully paid and margin securities, prohibiting the rehypothecation of the former while allowing a limited, calculated re-use of the latter.

The operational integrity of this rule is further reinforced by the requirement for broker-dealers to maintain a “[special reserve account](https://prime.greeks.live/area/special-reserve-account/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite)” for the exclusive benefit of their customers. This account, which must be held at a bank, serves as a depository for any excess of credits over debits in the firm’s customer-related bookkeeping. This mechanism provides an additional layer of financial protection, ensuring that customer funds are available and segregated.

The enforcement of these rules is a serious matter, with the SEC taking action against firms that fail to adhere to the strict segregation and possession or control requirements for fully paid securities. These enforcement actions underscore the regulator’s commitment to upholding the principles of the [Customer Protection](https://prime.greeks.live/question/in-what-ways-does-the-definition-of-a-customer-under-rule-15c3-3-impact-the-scope-of-protection/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) Rule and maintaining the stability and trustworthiness of the U.S. securities markets.

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## Strategy

From a strategic perspective, understanding the nuances of [SEC Rule 15c3-3](https://prime.greeks.live/area/sec-rule-15c3-3/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) is essential for any institutional client of a prime broker. The rule’s bifurcation of fully paid and margin securities creates a strategic framework for managing risk and optimizing financing arrangements. For a client, the most straightforward strategy to eliminate [rehypothecation risk](https://prime.greeks.live/area/rehypothecation-risk/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) is to operate on a “cash” basis, ensuring all securities are fully paid for. This approach, while simple, may not be optimal for all investment strategies, particularly those that rely on leverage to enhance returns.

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## What Are the Strategic Implications for Hedge Funds?

Hedge funds and other sophisticated investors often employ strategies that necessitate the use of margin. In these cases, the strategic focus shifts from complete avoidance of [rehypothecation](https://prime.greeks.live/area/rehypothecation/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) to the active management and monitoring of the associated risks. A key element of this strategy is a thorough understanding of the [prime brokerage agreement](https://prime.greeks.live/question/what-are-the-key-differences-between-a-prime-brokerage-agreement-and-an-isda-master-agreement/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). These agreements, while operating within the confines of SEC regulations, can have varying terms regarding the treatment of customer assets.

A client can, and should, negotiate terms that provide the greatest possible protection and transparency. This includes seeking clarity on how the [prime broker](https://prime.greeks.live/area/prime-broker/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) calculates the 140% limit and what types of financing activities the rehypothecated securities will be used for.

> For institutional clients, the strategic management of rehypothecation risk involves a deep understanding of their prime brokerage agreements and the operational controls in place to ensure compliance with SEC Rule 15c3-3.

Another strategic consideration is the diversification of [prime brokerage](https://prime.greeks.live/area/prime-brokerage/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) relationships. By spreading assets across multiple [prime brokers](https://prime.greeks.live/question/what-are-the-primary-differences-in-risk-management-protocols-between-prime-brokers/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite), a client can mitigate the concentration risk associated with a single point of failure. This approach, while potentially increasing operational complexity, provides a valuable layer of protection against the idiosyncratic risks of any one firm. It also allows for a comparative analysis of the services and protections offered by different prime brokers, enabling the client to allocate assets to those firms that provide the most favorable terms.

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## Operational Due Diligence

A proactive [due diligence](https://prime.greeks.live/area/due-diligence/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) process is a cornerstone of any effective strategy for managing rehypothecation risk. This process should extend beyond a review of the prime brokerage agreement to include an assessment of the firm’s operational infrastructure and compliance history. Questions to consider include:

- **Segregation Procedures** ▴ How does the prime broker operationally segregate fully paid securities from margin securities?

- **Reporting and Transparency** ▴ What level of detail is provided in account statements regarding the status of securities and any rehypothecation activity?

- **Compliance Record** ▴ Has the firm been subject to any regulatory actions related to the Customer Protection Rule?

The following table illustrates the different risk profiles associated with fully paid and margin accounts:

| Account Type | Rehypothecation Risk | Regulatory Protections | Strategic Considerations |
| --- | --- | --- | --- |
| Fully Paid (Cash) Account | None | Absolute prohibition on rehypothecation under Rule 15c3-3. | Eliminates counterparty risk related to rehypothecation but may limit leverage-based strategies. |
| Margin Account | Present | Rehypothecation limited to 140% of debit balance. | Requires active monitoring of debit balances and due diligence on prime broker’s practices. |

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## Execution

The execution of a strategy to manage rehypothecation risk requires a granular understanding of the operational mechanics of prime brokerage and the specific provisions of SEC [Rule 15c3-3](https://prime.greeks.live/area/rule-15c3-3/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). For an institutional client, this means translating strategic objectives into concrete operational procedures and controls. A critical first step is the establishment of a robust internal framework for monitoring prime brokerage relationships and account activity.

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## How Can a Firm Operationally Monitor Rehypothecation?

Operational monitoring begins with the detailed reconciliation of account statements provided by the prime broker. These statements should be scrutinized to ensure that all fully paid securities are correctly identified and segregated. Any discrepancies should be immediately investigated and resolved.

For margin accounts, the client should independently track their [debit balance](https://prime.greeks.live/area/debit-balance/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) and compare it to the value of securities that have been rehypothecated. This provides a check on the prime broker’s compliance with the 140% limit.

> Effective execution in managing rehypothecation risk hinges on the implementation of rigorous internal monitoring and reconciliation procedures, coupled with a deep understanding of the legal and operational frameworks governing prime brokerage.

The legal and contractual framework governing the prime brokerage relationship is another critical area of execution. The prime brokerage [agreement should](https://prime.greeks.live/question/what-are-the-key-differences-between-a-prime-brokerage-agreement-and-an-isda-master-agreement/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) be reviewed by legal counsel with expertise in this area. Specific provisions to focus on include:

- **Rights of Rehypothecation** ▴ The agreement should clearly state that the prime broker’s right to rehypothecate is limited to margin securities and is subject to the 140% cap.

- **Excess Margin** ▴ The agreement should detail how “excess margin” securities (the value of margin securities above the 140% limit) are treated and protected.

- **Reporting** ▴ The agreement should specify the frequency and content of reports related to rehypothecation, providing the client with the necessary information to monitor compliance.

The following table provides a simplified checklist for the operational execution of a rehypothecation risk management strategy:

| Area of Focus | Action Item | Key Performance Indicator (KPI) |
| --- | --- | --- |
| Account Monitoring | Daily reconciliation of account statements. | Zero discrepancies in the classification of fully paid securities. |
| Margin Management | Independent calculation of the 140% rehypothecation limit. | Prime broker’s rehypothecation activity consistently below the calculated limit. |
| Legal and Contractual | Annual review of prime brokerage agreements. | Confirmation that agreements align with current regulatory requirements and best practices. |
| Due Diligence | Biennial operational due diligence on prime brokers. | Satisfactory assessment of prime broker’s compliance and operational controls. |

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## References

- U.S. Securities and Exchange Commission. “Letter to Vanessa A. Countryman, Secretary, Securities and Exchange Commission.” 8 May 2023.

- U.S. Securities and Exchange Commission, Division of Trading and Markets. “Re ▴ Definition of ‘Fully Paid Securities’ under Rule 15c3-3.” 28 September 2017.

- Sidley Austin LLP. “SEC Amends Rule 15c3-3 to Require Daily Reserve Computations for Certain Broker-Dealers.” 13 January 2025.

- “SEC Charges Broker-Dealer With Numerous Violations of Customer Protection, Hypothecation and Reporting Rules.” Hedge Fund Law Report, 2025.

- International Capital Market Association. “What is ‘rehypothecation’ of collateral?”

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## Reflection

The regulatory framework surrounding rehypothecation, particularly the clear delineation established by SEC Rule 15c3-3, provides a critical safeguard for client assets. Yet, a comprehensive understanding of this rule is more than a matter of compliance; it is a component of a larger system of institutional intelligence. The degree to which a firm can leverage the opportunities presented by margin financing, while simultaneously mitigating the associated risks, is a direct reflection of the sophistication of its operational framework. The knowledge gained from a deep dive into the mechanics of rehypothecation should prompt an introspective look at a firm’s own processes.

Are the internal controls and monitoring procedures sufficiently robust to ensure compliance and protect assets? Is the due diligence process for selecting and overseeing prime brokers as rigorous as it needs to be? The answers to these questions will ultimately determine a firm’s ability to navigate the complexities of the modern financial markets and achieve a sustainable strategic advantage.

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## Glossary

<a href="https://prime.greeks.live/area/customer-protection-rule/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Customer Protection Rule

Meaning ▴ The Customer Protection Rule, codified as SEC Rule 15c3-3, mandates that broker-dealers safeguard customer funds and securities, prohibiting their use for proprietary firm operations. </a><a href="https://prime.greeks.live/area/client-asset-protection/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Client Asset Protection

Meaning ▴ Client Asset Protection defines the fundamental set of protocols and systemic mechanisms engineered to safeguard client holdings from counterparty, operational, and insolvency risks within a financial institution's infrastructure, particularly critical for institutional digital asset derivatives. </a><a href="https://prime.greeks.live/area/fully-paid-securities/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Close-up of intricate mechanical components symbolizing a robust Prime RFQ for institutional digital asset derivatives. These precision parts reflect market microstructure and high-fidelity execution within an RFQ protocol framework, ensuring capital efficiency and optimal price discovery for Bitcoin options](https://options.greeks.live/wp-content/uploads/2025/07/engineered-core-systems-driving-institutional-digital-asset-derivatives-rfq-protocol-execution.jpg)

## Fully Paid Securities

Meaning ▴ Fully paid securities denote financial instruments, such as equities or bonds, for which an investor has provided complete payment, leaving no outstanding margin loan or lien against the asset. </a><a href="https://prime.greeks.live/area/margin-securities/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Margin Securities

Meaning ▴ Margin securities represent financial assets, including cash or other liquid instruments, that an institutional participant pledges to a prime broker or clearinghouse as collateral to secure a leveraged trading position, particularly within the realm of digital asset derivatives. </a><a href="https://prime.greeks.live/area/broker-dealer/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Broker-Dealer

Meaning ▴ A Broker-Dealer is a financial entity operating under regulatory oversight that performs two distinct functions ▴ executing securities trades on behalf of clients (brokerage) and trading for its own account (dealing). </a><a href="https://prime.greeks.live/area/special-reserve-account/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Special Reserve Account

Meaning ▴ A Special Reserve Account represents a dedicated, segregated capital pool within an institutional financial framework, specifically earmarked to cover predefined liabilities, mitigate identified risks, or manage operational contingencies. </a><a href="https://prime.greeks.live/question/in-what-ways-does-the-definition-of-a-customer-under-rule-15c3-3-impact-the-scope-of-protection/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Customer Protection

The definition of "customer" in Rule 15c3-3 creates a protective boundary for client assets by dictating their segregation from firm risk. </a><a href="https://prime.greeks.live/area/rehypothecation-risk/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Rehypothecation Risk

Meaning ▴ Rehypothecation Risk identifies the potential for a client to incur a loss of posted collateral when a financial intermediary, such as a prime broker, re-uses those assets for its own financing or trading activities, and subsequently defaults. </a><a href="https://prime.greeks.live/area/sec-rule-15c3-3/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Sec Rule 15c3-3

Meaning ▴ SEC Rule 15c3-3, formally designated as the Customer Protection Rule, mandates that registered broker-dealers safeguard customer securities and cash by segregating these assets from the firm's proprietary capital. </a><a href="https://prime.greeks.live/question/what-are-the-key-differences-between-a-prime-brokerage-agreement-and-an-isda-master-agreement/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Prime Brokerage Agreement

A Prime Brokerage Agreement is a centralized service contract; an ISDA Master Agreement is a standardized bilateral derivatives protocol. </a><a href="https://prime.greeks.live/area/rehypothecation/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Rehypothecation

Meaning ▴ Rehypothecation defines a financial practice where a broker-dealer or prime broker utilizes client collateral, posted for margin or securities lending, as collateral for its own borrowings or to cover its proprietary positions. </a><a href="https://prime.greeks.live/area/prime-broker/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Abstract metallic components, resembling an advanced Prime RFQ mechanism, precisely frame a teal sphere, symbolizing a liquidity pool. This depicts the market microstructure supporting RFQ protocols for high-fidelity execution of digital asset derivatives, ensuring capital efficiency in algorithmic trading](https://options.greeks.live/wp-content/uploads/2025/07/precision-engineered-institutional-digital-asset-derivatives-prime-os-architecture-driving-rfq-protocol-execution-and-capital-efficiency-optimization.jpg)

## Prime Broker

Meaning ▴ A Prime Broker functions as a core financial intermediary, providing an integrated suite of services to institutional clients, primarily hedge funds, encompassing global execution, financing, clearing, settlement, and operational support across diverse asset classes, including nascent digital asset derivatives. </a><a href="https://prime.greeks.live/area/prime-brokerage/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Prime Brokerage

Meaning ▴ Prime Brokerage represents a consolidated service offering provided by large financial institutions to institutional clients, primarily hedge funds and asset managers. </a><a href="https://prime.greeks.live/question/what-are-the-primary-differences-in-risk-management-protocols-between-prime-brokers/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Prime Brokers

The primary differences in prime broker risk protocols lie in the sophistication of their margin models and collateral systems. </a><a href="https://prime.greeks.live/area/due-diligence/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Due Diligence

Meaning ▴ Due diligence refers to the systematic investigation and verification of facts pertaining to a target entity, asset, or counterparty before a financial commitment or strategic decision is executed. </a><a href="https://prime.greeks.live/area/rule-15c3-3/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Rule 15c3-3

Meaning ▴ Rule 15c3-3, formally known as the Customer Protection Rule, establishes a stringent regulatory framework requiring broker-dealers to safeguard customer securities and cash. </a><a href="https://prime.greeks.live/area/debit-balance/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Polished concentric metallic and glass components represent an advanced Prime RFQ for institutional digital asset derivatives. It visualizes high-fidelity execution, price discovery, and order book dynamics within market microstructure, enabling efficient RFQ protocols for block trades](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-prime-os-precision.jpg)

## Debit Balance

Meaning ▴ A debit balance represents a negative financial position in an account, indicating an amount owed by a client to a prime broker or financial institution. </a><a href="https://prime.greeks.live/question/what-are-the-key-differences-between-a-prime-brokerage-agreement-and-an-isda-master-agreement/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sophisticated, multi-component system propels a sleek, teal-colored digital asset derivative trade. The complex internal structure represents a proprietary RFQ protocol engine with liquidity aggregation and price discovery mechanisms](https://options.greeks.live/wp-content/uploads/2025/07/principals-high-fidelity-rfq-engine-for-digital-asset-derivatives-execution.jpg)

## Agreement Should

A Prime Brokerage Agreement is a centralized service contract; an ISDA Master Agreement is a standardized bilateral derivatives protocol. </a>

**Tags:** [Client Asset Protection](https://options.greeks.live/area/client-asset-protection/), [Customer Protection Rule](https://options.greeks.live/area/customer-protection-rule/), [Debit Balance](https://options.greeks.live/area/debit-balance/), [Rehypothecation Risk](https://options.greeks.live/area/rehypothecation-risk/), [Excess Margin Securities](https://options.greeks.live/area/excess-margin-securities/), [Securities and Exchange Commission](https://options.greeks.live/area/securities-and-exchange-commission/)	

## Discover More

- 
### [What Are the Key Differences between Onshore and Offshore Binary Options Regulators?](https://options.greeks.live/question/what-are-the-key-differences-between-onshore-and-offshore-binary-options-regulators/)
![A sleek central sphere with intricate teal mechanisms represents the Prime RFQ for institutional digital asset derivatives. Intersecting panels signify aggregated liquidity pools and multi-leg spread strategies, optimizing market microstructure for RFQ execution, ensuring high-fidelity atomic settlement and capital efficiency.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-core-engine.jpg)

The core distinction lies in the enforceability of oversight: onshore regulators provide a robust, legally-integrated protection framework, whereas offshore regulators offer flexibility at the cost of direct accountability and investor security.

- 
### [How Can I Verify If a Binary Options Broker Is Genuinely Regulated?](https://options.greeks.live/question/how-can-i-verify-if-a-binary-options-broker-is-genuinely-regulated/)
![Abstract forms depict institutional liquidity aggregation and smart order routing. Intersecting dark bars symbolize RFQ protocols enabling atomic settlement for multi-leg spreads, ensuring high-fidelity execution and price discovery of digital asset derivatives.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-high-fidelity-execution-2.jpg)

Verifying a binary options broker's regulation is a direct validation of their license against the official register of the claimed financial authority.

- 
### [In What Ways Does the Prime Broker’s Central Role Amplify the Impact of a Cross-Default Event?](https://options.greeks.live/question/in-what-ways-does-the-prime-brokers-central-role-amplify-the-impact-of-a-cross-default-event/)
![Central institutional Prime RFQ, a segmented sphere, anchors digital asset derivatives liquidity. Intersecting beams signify high-fidelity RFQ protocols for multi-leg spread execution, price discovery, and counterparty risk mitigation. A smaller sphere denotes dark pool dynamics.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-cross-asset-rfq-execution-hub.jpg)

A prime broker's centralization transforms a client default into a systemic contagion event via contractual and financial amplification.

- 
### [How Does the PAB Reserve Formula Differ from the Customer Reserve Formula?](https://options.greeks.live/question/how-does-the-pab-reserve-formula-differ-from-the-customer-reserve-formula/)
![Two polished metallic rods precisely intersect on a dark, reflective interface, symbolizing algorithmic orchestration for institutional digital asset derivatives. This visual metaphor highlights RFQ protocol execution, multi-leg spread aggregation, and prime brokerage integration, ensuring high-fidelity execution within dark pool liquidity.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-prime-os-execution.jpg)

The PAB and Customer Reserve Formulas apply a single calculation framework to two different liability pools, segregating broker-dealer and customer assets.

- 
### [What Are the Key Differences between Us and Uk Asset Segregation Rules?](https://options.greeks.live/question/what-are-the-key-differences-between-us-and-uk-asset-segregation-rules/)
![A multi-faceted algorithmic execution engine, reflective with teal components, navigates a cratered market microstructure. It embodies a Principal's operational framework for high-fidelity execution of digital asset derivatives, optimizing capital efficiency, best execution via RFQ protocols in a Prime RFQ.](https://options.greeks.live/wp-content/uploads/2025/07/advanced-rfq-protocol-engine-for-institutional-digital-asset-derivatives.jpg)

US rules use a formulaic reserve for cash and possession requirements for securities, while UK rules mandate daily reconciliation of client assets held in trust.

- 
### [What Are the Key Differences in Managing Counterparty Risk between an RFP and an RFQ Stage?](https://options.greeks.live/question/what-are-the-key-differences-in-managing-counterparty-risk-between-an-rfp-and-an-rfq-stage/)
![Intricate metallic components signify system precision engineering. These structured elements symbolize institutional-grade infrastructure for high-fidelity execution of digital asset derivatives. Mechanics highlight RFQ protocol efficiency, atomic settlement, and robust market microstructure for optimal price discovery within a Prime RFQ.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-precision-engineering-for-high-fidelity-execution-and-latency-optimization.jpg)

Counterparty risk assessment differs fundamentally: RFP is a strategic audit of a potential partner's systemic resilience, while RFQ is a tactical, real-time pricing of transactional credit risk.

- 
### [How Does Collateral Rehypothecation Increase Systemic Risk in Financial Markets?](https://options.greeks.live/question/how-does-collateral-rehypothecation-increase-systemic-risk-in-financial-markets/)
![Abstract bisected spheres, reflective grey and textured teal, forming an infinity, symbolize institutional digital asset derivatives. Grey represents high-fidelity execution and market microstructure teal, deep liquidity pools and volatility surface data. This visualizes optimized RFQ protocols for multi-leg spread and atomic settlement within a Prime RFQ.](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-rfq-protocols-for-digital-asset-derivatives-execution.jpg)

Rehypothecation amplifies systemic risk by creating opaque, interconnected collateral chains that transmit localized shocks globally.

- 
### [How Does a Multi-Prime Broker Setup Mitigate Counterparty Concentration Risk?](https://options.greeks.live/question/how-does-a-multi-prime-broker-setup-mitigate-counterparty-concentration-risk/)
![Translucent rods, beige, teal, and blue, intersect on a dark surface, symbolizing multi-leg spread execution for digital asset derivatives. Nodes represent atomic settlement points within a Principal's operational framework, visualizing RFQ protocol aggregation, cross-asset liquidity streams, and optimized market microstructure.](https://options.greeks.live/wp-content/uploads/2025/07/digital-asset-derivatives-rfq-protocol-aggregation-and-high-fidelity-execution.jpg)

A multi-prime broker setup mitigates counterparty risk by architecting a distributed network to diversify assets and financing.

- 
### [What Are the Legal Liabilities for a Broker-Dealer If Their Third-Party Risk System Fails?](https://options.greeks.live/question/what-are-the-legal-liabilities-for-a-broker-dealer-if-their-third-party-risk-system-fails/)
![A precision probe, symbolizing Smart Order Routing, penetrates a multi-faceted teal crystal, representing Digital Asset Derivatives multi-leg spreads and volatility surface. Mounted on a Prime RFQ base, it illustrates RFQ protocols for high-fidelity execution within market microstructure.](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-rfq-digital-asset-derivatives-high-fidelity-execution-probe.jpg)

A broker-dealer's liability for a third-party risk system failure is absolute, stemming from its non-delegable duty to supervise.

---

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---

**Original URL:** https://options.greeks.live/question/can-a-prime-broker-rehypothecate-fully-paid-securities-under-sec-rule-15c3-3/
