Hypothecation of Customer Securities

What this video covers

• The definition of hypothecation: pledging securities as collateral without transferring ownership, and how the firm profits from the spread between broker loan rates and margin interest
• Why customer-to-customer commingling requires written consent from each customer, and why customer-to-firm commingling is an absolute ban that no consent can override
• How the aggregate indebtedness limit works as a pooled ceiling across all pledged customers, not a per-customer cap
• The written pledgee notice requirement: what it tells the lender, why it prevents superior rights claims, and its role in firm failure scenarios
• The jurisdictional distinction between the exchange member rule and the over-the-counter rule, which covers all broker-dealers universally
• How the hypothecation rules fit into the broader customer protection chain alongside segregation and securities lending limits
• The 140% boundary for non-excess margin securities: what can be pledged, what must be segregated, and why excess margin cannot be hypothecated