Capital Haircut Optimization Program (CHOP)

CHOP (Capital Haircut Optimization Program) calculates capital requirements for broker dealers and market makers in accordance with Security and Exchange Commission (SEC) Risk Based Haircut rules for your FOCUS Report.

The SEC rules detail a method of calculating capital requirements of a security account based on an estimate of the market risk of the account. The account can contain long and short positions in stock, options, futures, indexes, index baskets, and other securities. The risk of an account is measured as its maximum expected loss as the prices of the securities in the account move through a range of up and down steps. The maximum expected loss is a weighted net of the profits and losses on the securities in the account.

CHOP works with the Option Clearing Corporation (OCC) Theoretical Information Online (TIO) Risk Based Haircut (RBH) System. At present, the OCC is the only vendor approved by the SEC for supplying theoretical option values and other data needed for the haircut calculations.