The Financial World is Steeped in Special Lingo

Fri Jun 6 05:39:56 UTC 2008

I should add that Barry has a discussion of this, at, showing the development of the term from 1970 on.  He also discusses "Texas haircut," which I have not otherwise heard.
John Baker


From: American Dialect Society on behalf of Baker, John
Sent: Thu 6/5/2008 9:02 PM
Subject: Re: The Financial World is Steeped in Special Lingo

        The earliest I see is a passing reference by a hearing examiner
(what today would be called an administrative law judge) in an
enforcement action against a defunct broker-dealer and its managers for
violations of the net capital and other rules:  "It may also be noted,
in respect of the discussion in Mier's brief relating to the "haircut",
that the deduction of 30% from the value of registrant's securities
required by Rule 15c3-1(c) is mandatory without regard to the general
condition of the securities market."  Millard M. Mier, 1966 SEC LEXIS
2381, at *8 n.13 (Dec. 27, 1966).

        A much more extensive discussion, and one that likely was much
more influential, is found less than 3 weeks later in an SEC
interpretive release on the operation of the net capital rule (Rule
15c3-1 under the Securities Exchange Act of 1934).  While this is far
too extensive to quote in full, the following should be sufficient for
present purposes:

        "In computing "net capital," the rule requires deductions from
"net worth" of certain specific percentages of the market values of
marketable securities and futures commodity contracts, long and short,
in the capital and proprietary accounts of the broker or dealer, and in
the "accounts of partners." (These deductions are generally referred to
in the industry as "haircuts.") It also requires a deduction with
respect to total long or total short futures contracts in each commodity
carried for all customers.  The purpose of these deductions from "net
worth," is to provide a margin of safety against losses incurred by a
broker or dealer as a result of market fluctuations in the prices of
such securities or futures commodity contracts."

Interpretation Released as an Assistance to Brokers and Dealers by
Commission's Division of Trading and Markets and by the Office of Chief
Accountant Which Explains the Operation of Its "Net Capital" Rule 15c3-1
with an Example and Worksheet of the Computation of "Net Capital" by a
Hypothetical Broker-Dealer, Securities and Exchange Commission
Accounting Series Release No. 107, Securities Exchange Act of 1934
Release No. 8024, 32 Fed. Reg. 856, 1967 SEC LEXIS 1265, at *22 - *23
(Jan. 18, 1967) (footnote omitted).

John Baker

-----Original Message-----
From: American Dialect Society [mailto:ADS-L at LISTSERV.UGA.EDU] On Behalf
Of Cohen, Gerald Leonard
Sent: Thursday, June 05, 2008 7:45 PM
Subject: Re: The Financial World is Steeped in Special Lingo

Yes, please.

Gerald Cohen


Original message from John Baker, Thu 6/5/2008 2:43 PM


        I can track down some early uses of "haircut" if there is
sufficient interest.

John Baker

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