How Does Cross-Margining Reduce Capital Requirements for a Prime Brokerage Client?

Cross-margining allows a client to offset margin requirements across different, but correlated, positions held within the same prime brokerage account. Instead of calculating margin separately for each position, the net risk is calculated.

This reduces the total capital that needs to be posted as collateral, freeing up capital for other investments. It is particularly effective for clients trading related derivatives like futures and options on the same underlying asset.