FINRA Requests Comment on Proposed Amendments to FINRA Rule 4521 and New Supplemental Liquidity Schedule
Liquidity Reporting and Notification
Regulatory Notice | |
Notice Type Request for Comment |
Referenced Rules & Notices FINRA Rule 4521 FINRA Rule 4524 FINRA Rule 6710 Notice to Members 99-92 Regulatory Notice 10-57 Regulatory Notice 15-33 SEA Rule 15c3-3 SEA Rule 17a-5 |
Suggested Routing Compliance Legal Operations Regulatory Reporting Risk Management Senior Management |
Key Topics FOCUS Reports Liquidity Reporting and Notification Supplemental Liquidity Schedule |
Comment Period Expires: March 8, 2018
Summary
FINRA is seeking comment on proposed amendments to FINRA Rule 4521 (Notifications, Questionnaires and Reports) that would require specified member firms to notify FINRA no more than 48 hours after specified events that may signal an adverse change in liquidity risk. FINRA also seeks comment on a proposed new Supplemental Liquidity Schedule (SLS) that member firms with the largest customer and counterparty exposures would file as a supplement to the FOCUS Report. On the new SLS, these firms would report information related to specified financing transactions and other sources or uses of liquidity. The information would include among other things financing term, collateral types and large counterparties.
FINRA is seeking comment on all aspects of the proposed amendments to Rule 4521 and the proposed new SLS (together, referred to as the "proposal"), including the impact of the proposal on market participants. The proposed amendments to Rule 4521 are available as Attachment A. The proposed SLS and instructions to the SLS are available as Attachments B and C, respectively.
Questions regarding this Notice should be directed to:
Action Requested
FINRA encourages all interested parties to comment on the proposal. Comments must be received by March 8, 2018.
Comments must be submitted through one of the following methods:
Jennifer Piorko Mitchell
Office of the Corporate Secretary
FINRA
1735 K Street, NW
Washington, DC 20006-1506
To help FINRA process comments more efficiently, persons should use only one method to comment on the proposal.
Important Notes: All comments received in response to this Notice will be made available to the public on the FINRA website. In general, FINRA will post comments as they are received.1
Before becoming effective, a proposed rule change must be authorized for filing with the SEC by the FINRA Board of Governors, and then must be filed with the SEC pursuant to SEA Section 19(b).2
Background & Discussion
Effective monitoring of liquidity and funding risks is an essential element of firms' financial responsibility and an ongoing focus for FINRA's financial supervision programs. To that end, FINRA is issuing this Notice to seek comment on proposed amendments to FINRA Rule 4521 (Notifications, Questionnaires and Reports) and on a new Supplemental Liquidity Schedule (SLS) that specified member firms would file as a supplement to the FOCUS Report. The proposed rule amendments and the new SLS, in combination, are tailored requirements that will improve FINRA's ability to monitor for events that signal an adverse change in the liquidity risk of the firms that would be subject to the new requirements.
Firms' liquidity and funding stress was a significant factor in the financial crisis of 2008.3 Since that time, FINRA has looked closely at firms' liquidity and funding risk management practices.4Regulatory Notice 10-57 expressed FINRA's expectation that firms develop and maintain robust funding and liquidity risk management practices and discussed examinations that FINRA had conducted of the practices of selected firms. Regulatory Notice 15-33 provided guidance on liquidity risk management practices and described FINRA's review of policies and practices at selected firms related to managing liquidity needs in a stressed environment. FINRA believes that the proposed requirements are a logical complement to ongoing priorities and guidance that FINRA has communicated to firms.
In developing the proposal, FINRA has engaged in discussions with industry participants and has tailored the proposal to firms with the largest customer and counterparty exposures. As discussed further below, FINRA is seeking comment on all aspects of the proposal, including the proposal's impact on market participants.
Following is a summary of the key aspects of the proposal.
New SLS
The new, proposed SLS is tailored to larger firms and is intended to provide more detailed information about such firms' liquidity profile than is reflected on the FOCUS Report (Part II, Part IIA or Part II CSE, as appropriate). Under the proposal, unless otherwise permitted by FINRA in writing, the SLS is required to be filed by each carrying or clearing FINRA firm with $25 million or more in total credits, as determined pursuant to the customer reserve formula computation as set forth in SEA Rule 15c3-3 Exhibit A, and by each FINRA firm whose aggregate amount outstanding under repurchase agreements, securities loan contracts and bank loans is equal to or greater than $1 billion, as reported on the most recently filed FOCUS Report.5
These firms would report information related to specified financing transactions and other sources or uses of liquidity.
Specifically, they would provide detailed reporting as to their reverse repurchase and repurchase agreements, securities borrowed and securities loaned, bank loans and other credit facilities, total available collateral, margin loans, collateral securing margin loans, deposits at clearing organizations, and cash and securities received and delivered on derivative transactions not cleared through a central clearing counterparty. The required information will enable FINRA to more effectively assess these firms' ability to continue to fund their operations and to meet their settlement, customer and counterparty obligations, thereby enabling FINRA to more effectively evaluate these firms' liquidity and funding profiles and to identify higher risk firms. In particular, the information would facilitate FINRA's efforts to distinguish among firms that may have similar balance sheets but very different liquidity risk profiles that could impact their ability to fund their operations during stress scenarios.6
Amendments to FINRA Rule 4521
The SEC approved Rule 4521 as part of FINRA's new, consolidated financial responsibility rules in 2009.7 The rule provides FINRA authority to request information from firms to carry out its surveillance and examination responsibilities. Paragraph (c) of the rule currently requires each carrying or clearing firm to notify FINRA in writing, no more than 48 hours after its tentative net capital as computed pursuant to SEA Rule 15c3-1 has declined 20 percent or more from the amount reported in its most recent FOCUS Report or, if later, the most recent such notification filed with FINRA.
Under the proposal, additional notification requirements would be applied to the same firms that would be subject to the SLS (that is, unless otherwise permitted by FINRA in writing, each carrying or clearing firm with $25 million or more in total credits, as determined pursuant to the customer reserve formula computation as set forth in SEA Rule 15c3-3 Exhibit A, and each firm whose aggregate amount outstanding under repurchase agreements, securities loan contracts and bank loans is equal to or greater than $1 billion, as reported on the most recently filed FOCUS Report).8 Specifically, the specified firms would be required to notify FINRA in writing, no more than 48 hours after:
These notification requirements should enable FINRA to be promptly alerted by a firm whose ability to fund its operations has been reduced significantly within a short period of time. FINRA believes that the notifications are consistent with the types of events or conditions that many firms currently monitor for as part of prudent funding and liquidity risk management programs. Further, the notifications dovetail with the reporting that the specified firms would provide pursuant to the proposed SLS, as discussed above.
Impact on Market Participants and Request for Comment on the Proposal
The purpose of the proposed SLS is to provide FINRA with more detailed information about the specified firms' liquidity profiles than what is reflected on the current FOCUS Reports. This will enable FINRA to more effectively assess firms' ability to meet their settlement, customer and counterparty obligations and to differentiate between high and low risk firms by analyzing firm-specific risk factors. The primary anticipated net benefit would be that FINRA is provided a more granular level of detail on firms' funding sources such as term or maturity information, collateral quality, haircuts and use of secured versus unsecured financing, so that FINRA can assess whether firms possess adequate liquidity pools to fund their daily operations without relying on relatively less stable sources such as short-term unsecured loans or borrowing against customer collateral.
A potential significant benefit of this proposal may also arise from the information that can be generated on the interconnectedness of firms through significant counterparty exposure, which is a key component in FINRA's efforts to effectively monitor liquidity and funding risks as a part of its regulatory programs.
FINRA estimates that, based on the quarterly FOCUS data from 2016, approximately 110 firms, of which approximately half are part of a bank holding company, would be required to file the SLS under the proposal, though the actual number may fluctuate from month to month as a firm will not be required to file the SLS for any month where the firm does not meet the specified thresholds. Based on discussions with a select number of firms, FINRA does not expect the filing of the SLS to create significant direct compliance costs for these firms, as the information required to complete the SLS should be readily available to the firms. However, firms may potentially incur costs associated with processing data to compute certain items on the SLS.
Similarly, the new notification requirements in the proposed amendments to FINRA Rule 4521 are expected to cause minimal direct burdens on firms that are subject to the SLS, as FINRA believes that firms already monitor events that trigger notification to FINRA as a part of funding and liquidity risk management programs. Some level of one-time direct costs may be incurred by firms that establish automated monitoring tools to comply with the rule. However, to the extent that firms and liquidity providers alter their demand and supply for funding as a result of the proposal, there might be an indirect impact on competition in the funding markets. Firms may choose to diversify their counterparties to mitigate counterparty risk and to report less concentration of counterparties in the SLS. As a result, current counterparties would have to search for other firms that demand funding. Similarly, liquidity providers may potentially shift their client base from specified FINRA firms, to non-specified FINRA firms or to non-firms, to avoid being reported as a counterparty on the SLS. Such change in behavior is expected to be more likely for firms and liquidity providers that are at the margin with respect to the reporting thresholds. These effects may lead to greater search costs or funding costs for some impacted firms.
As discussed above, FINRA is seeking comment on all aspects of the proposed new SLS and the proposed notification amendments to Rule 4521, including the impact of the proposal on market participants.
Request for Comment with Regard to the Proposed SLS
Request for Comment with Regard to the Proposed Amendments to FINRA Rule 4521
Additional Request for Comment with Regard to the Impact of the Proposal
1. FINRA will not edit personal identifying information, such as names or email addresses, from submissions. Persons should submit only information that they wish to make publicly available. See NTM 03-73 (November 2003) (NASD Announces Online Availability of Comments) for more information.
2.See SEA Section 19 and rules thereunder. After a proposed rule change is filed with the SEC, the proposed rule change generally is published for public comment in the Federal Register. Certain limited types of proposed rule changes, however, take effect upon filing with the SEC. See SEA Section 19(b)(3) and SEA Rule 19b-4.
3.See, e.g., Final Report of the National Commission on the Causes of the Financial and Economic Crisis in the United States (January 2011).
4.See Regulatory Notice 10-57 (November 2010) (Risk Management) and Regulatory Notice 15-33 (September 2015) (Liquidity Risk). However, even prior to the financial crisis, FINRA noted the importance of risk management practices. See, e.g., Notice to Members 99-92 (November 1999) (Risk Management Practices) (setting forth a joint statement by the SEC, NASD and NYSE on broker-dealer risk management practices). FINRA has also discussed liquidity risk in its recent Annual Regulatory and Examination Priorities Letters.
5. Under the proposal, the SLS must be filed within 22 business days after the end of each month. The SLS need not be filed for any period where the firm does not meet the $25 million or $1 billion thresholds.
6. Upon receiving comment on the proposed SLS, FINRA proposes to file the SLS with the SEC pursuant to Rule 4524. Rule 4524 provides that, as a supplement to filing FOCUS reports required pursuant to SEA Rule 17a-5 and FINRA Rule 2010, each member, as FINRA shall designate, shall file such additional financial or operational schedules or reports as FINRA may deem necessary or appropriate for the protection of investors or in the public interest. The rule provides that the content of such schedules or reports, their format, and the timing and the frequency of such supplemental filings shall be specified in a Regulatory Notice (or similar communication) issued pursuant to the rule. The rule further provides that FINRA shall file with the SEC pursuant to Section 19(b) of the Exchange Act the content of any such Regulatory Notice (or similar communication) issued pursuant to the rule.
7.See Regulatory Notice 09-71 (December 2009) (SEC Approves Consolidated FINRA Rules Governing Financial Responsibility).
8. Supplementary Material .01 of Rule 4521 provides that, for purposes of the rule, all requirements that apply to a member that clears or carries customer accounts shall also apply to any member that, operating pursuant to the exemptive provisions of SEA Rule 15c3-3(k)(2) (i), either clears customer transactions pursuant to such exemptive provisions or holds customer funds in a bank account established thereunder. By way of clarification, FINRA notes that firms otherwise subject to the rule by virtue of Supplementary Material .01 would not be subject to the new requirements if they do not meet the specified $25 million or $1 billion thresholds.
9. FINRA Rule 6710(p) defines "U.S. Treasury Security" to mean "a security issued by the U.S. Department of the Treasury to fund the operations of the federal government or to retire such outstanding securities."
10. FINRA Rule 6710(k) defines "agency" to mean a United States executive agency as defined in 5 U.S.C. 105 that is authorized to issue debt directly or through a related entity, such as a government corporation, or to guarantee the repayment of principal or interest of a debt security issued by another entity. The term excludes the U.S. Department of the Treasury in the exercise of its authority to issue U.S. Treasury Securities as defined under FINRA Rule 6710(p). Under 5 U.S.C. 105, the term "executive agency" is defined to mean an "Executive department, a Government corporation, and an independent establishment."
11. FINRA Rule 6710(n) defines GSE to have the meaning set forth in 2 U.S.C. 622(8). Under 2 U.S.C. 622(8), a GSE is defined, in part, to mean a corporate entity created by a law of the United States that has a Federal charter authorized by law, is privately owned, is under the direction of a board of directors, a majority of which is elected by private owners, and, among other things, is a financial institution with power to make loans or loan guarantees for limited purposes such as to provide credit for specific borrowers or one sector and raise funds by borrowing (which does not carry the full faith and credit of the Federal Government) or to guarantee the debt of others in unlimited amounts.
12. Paragraphs (d)(3)(A) and (d)(3)(B) address free credit balances and margin balances for purposes of specified monthly reporting requirements under current paragraph (d) of Rule 4521.
ATTACHMENT A
Below is the text of the proposed rule change. Proposed new language is underlined; proposed deletions are in brackets.
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• • • Supplementary Material: --------------
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ATTACHMENT B
FINRA SLS
Supplemental Report to FOCUS REPORT
Supplemental Liquidity Schedule ("SLS")
(Please read instructions before completing form)
NAME OF BROKER-DEALER | SEC FILE NO. | ||
ADDRESS OF PRINCIPAL PLACE OF BUSINESS | FIRM ID NO. | ||
(No. and Street) | FOR PERIOD ENDING (MM/DD/YY) | ||
(City) (State) (Zip Code) | |||
NAME OF PERSON COMPLETING THIS REPORT TELEPHONE NO. OF PERSON COMPLETING THIS REPORT |
All amounts should be reported in thousands.
REVERSE REPURCHASE AND REPURCHASE AGREEMENTS | Reverse Repurchase (000s) | Repurchase (000s) |
1. U.S. Treasury Securities | ||
a. Open and Overnight | $ | $ |
b. Term | $ | $ |
Weighted Average Maturity | _______________ | _______________ |
c. Forward Starting | $ | $ |
2. U.S. Government Agency & Government-Sponsored Enterprise Securities | ||
a. Open and Overnight | $ | $ |
b. Term | $ | $ |
Weighted Average Maturity | _______________ | _______________ |
c. Forward Starting | $ | $ |
3. Equity Securities | ||
a. Open and Overnight | $ | $ |
b. Term | $ | $ |
Weighted Average Maturity | _______________ | _______________ |
c. Forward Starting | $ | $ |
4. Investment Grade Corporate Obligations | ||
a. Open and Overnight | $ | $ |
b. Term | $ | $ |
Weighted Average Maturity | _______________ | _______________ |
c. Forward Starting | $ | $ |
5. Other Collateral | ||
a. Open and Overnight | $ | $ |
b. Term | $ | $ |
Weighted Average Maturity | _______________ | _______________ |
c. Forward Starting | $ | $ |
6. Total at Tri-Party Custodian or DTCC | $ | $ |
7. TOTAL | $ | $ |
Top 5 Counterparties: Reverse Repurchase and Repurchase Agreements | |||
Reverse Repurchase Counterparty Name | Contract Value (000s) | Repurchase Counterparty Name | Contract Value (000s) |
1. | $ | 1. | $ |
2. | $ | 2. | $ |
3. | $ | 3. | $ |
4. | $ | 4. | $ |
5. | $ | 5. | $ |
SECURITIES BORROWED AND SECURITIES LOANED | Securities Borrowed (000s) | Securities Loaned (000s) |
1. U.S. Treasury Securities | ||
a. Open and Overnight | $ | $ |
b. Term | $ | $ |
Weighted Average Maturity | ______________ | ______________ |
c. Forward Starting | $ | $ |
2. U.S. Government Agency & Government-Sponsored Enterprise Securities | ||
a. Open and Overnight | $ | $ |
b. Term | $ | $ |
Weighted Average Maturity | ______________ | ______________ |
c. Forward Starting | $ | $ |
3. Equity Securities | ||
a. Open and Overnight | $ | $ |
b. Term | $ | $ |
Weighted Average Maturity | ______________ | ______________ |
c. Forward Starting | $ | $ |
4. Investment Grade Corporate Obligations | ||
a. Open and Overnight | $ | $ |
b. Term | $ | $ |
Weighted Average Maturity | ______________ | ______________ |
c. Forward Starting | $ | $ |
5. Other Collateral | ||
a. Open and Overnight | $ | $ |
b. Term | $ | $ |
Weighted Average Maturity | ____________ | _____________ |
c. Forward Starting | $ | $ |
6. Total Guaranteed by a CCP | $ | $ |
7. TOTAL | $ | $ |
Top 5 Counterparties: Securities Borrowed and Securities Loaned | |||
Securities Borrowed Counterparty Name | Contract Value (000s) | Securities Loaned Counterparty Name | Contract Value (000s) |
1. | $ | 1. | $ |
2. | $ | 2. | $ |
3. | $ | 3. | $ |
4. | $ | 4. | $ |
5. | $ | 5. | $ |
BANK LOAN AND OTHER CREDIT FACILITIES | ||||||
Total (000s) | Affiliate | Non-Affiliate | ||||
Committed (000s) | Uncommitted (000s) | Committed (000s) | Uncommitted (000s) | |||
1. U.S. Treasury, U.S. Government Agency & Government-Sponsored Enterprise Securities | ||||||
a. Open and Overnight | $ | $ | $ | $ | $ | |
b. Term | $ | $ | $ | $ | $ | |
2. Equity Securities | ||||||
a. Open and Overnight | $ | $ | $ | $ | $ | |
b. Term | $ | $ | $ | $ | $ | |
3. Other Collateral | ||||||
a. Open and Overnight | $ | $ | $ | $ | $ | |
b. Term | $ | $ | $ | $ | $ | |
4. Unused Portion of Secured Credit Facilities | $ | $ | $ | $ | $ | |
5. Unsecured Credit Facilities | ||||||
a. Drawn Amounts | $ | $ | $ | $ | $ | |
b. Undrawn Amounts | $ | $ | $ | $ | $ |
TOTAL AVAILABLE COLLATERAL (Free Box) | |||
Total Market Value | |||
1. U.S. Treasury Securities | $ | ||
MARGIN LOANS | ||
Balance (000s) | ||
1. Demand Loans | $ | |
2. Term Loans—Drawn | $ | |
a. Weighted Average Maturity of Term Loans | ______________ | |
3. Term Loans—Undrawn | $ |
COLLATERAL SECURING MARGIN LOANS | ||
a. Top 5 Equity Securities | ||
CUSIP # | ISSUER | Market Value (000s) |
1. | $ | |
2. | $ | |
3. | $ | |
4. | $ | |
5. | $ | |
b. Top 5 Fixed Income Securities (excluding U.S. Treasury, Government Agency & Government-Sponsored Enterprise Securities) | ||
CUSIP | ISSUER | Market Value (000s) |
1. | $ | |
2. | $ | |
3. | $ | |
4. | $ | |
5. | $ |
DEPOSITS AT CLEARING ORGANIZATIONS | |||||
Amount Required (000s) | Amount Posted (000s) | Proprietary | Largest Single Intra-Month Call (000s) | Date | |
1. DTCC (total) | $ | $ | $ | $ | |
a. NSCC | $ | $ | $ | $ | |
b. FICC | $ | $ | $ | $ | |
2. OCC | $ | $ | $ | $ | |
3. CME | $ | $ | $ | $ | |
4. ICE | $ | $ | $ | $ | |
5. Other>10% of | $ | $ | $ | $ |
CASH AND SECURITIES RECEIVED AND DELIVERED ON DERIVATIVE TRANSACTIONS NOT CLEARED THROUGH A CCP | |||
Cash and Securities Delivered In to Collateralize Receivables | |||
Counterparty Name | Affiliate (Y/N) | Total Cash (000s) | Total Securities |
1. | $ | $ | |
2. | $ | $ | |
3. | $ | $ | |
4. | $ | $ | |
5. | $ | $ |
Cash and Securities Delivered Out to Collateralize Payables | |||
Counterparty Name | Affiliate (Y/N) | Total Cash (000s) | Total Securities |
1. | $ | $ | |
2. | $ | $ | |
3. | $ | $ | |
4. | $ | $ | |
5. | $ | $ |
ATTACHMENT C
SUPPLEMENTAL SCHEDULE TO FOCUS REPORT
Supplemental Liquidity Schedule
GENERAL INSTRUCTIONS
The Supplemental Liquidity Schedule ("SLS") is intended to provide more detailed information about a member's liquidity profile than what is reflected on the FOCUS Report (Part II, Part IIA or Part II CSE, as appropriate). Unless otherwise permitted by FINRA in writing, the SLS is required to be filed by each carrying or clearing FINRA member with $25 million or more in total credits, as determined pursuant to the customer reserve formula computation as set forth in SEA Rule 15c3-3 Exhibit A, and by each FINRA member whose aggregate amount outstanding under repurchase agreements, securities loans contracts and bank loans is equal to or greater than $1 billion, as reported on the member's most recently filed FOCUS report.
The SLS must be filed within 22 business days after the end of each month. A member need not file the SLS for any period where the member does not meet the $25 million or $1 billion thresholds.
SPECIFIC INSTRUCTIONS
Note: For explanations of the types of securities to be included in the requested line items of the SLS, please refer to "Explanation of Terms" on pages 3 and 4 of these instructions.
Reverse Repurchase and Repurchase Agreements
Report the gross contract value of all reverse repurchase and repurchase agreements by collateral type, including all intercompany and third party agreements. Exclude intracompany agreements between desks within the same legal entity. Report collateral upgrade transactions based on the contract type for each leg of the transaction (i.e., report Master Repurchase Agreements ("MRA") contracts in the Reverse Repurchase and Repurchase Agreements section and Master Stock Loan Agreement ("MSLA") contracts in the Securities Borrowed and Securities Loaned section, as discussed further below).
Compute the "Weighted Average Maturity" on term agreements only (i.e., exclude open and overnights). For contracts that contain an option feature that permits the counterparty to choose not to renew with an agreed-upon notice period ("evergreen contracts"), use the earliest possible close date.
Report in "Other Collateral" the gross contract value of all reverse repurchase and repurchase agreements not otherwise reported in the previous product categories.
For "Total at Tri-Party Custodian or DTCC," report the gross contract value of all reverse repurchase and repurchase agreements where the collateral is held at a tri-party custodian or at Depository Trust & Clearing Corporation (DTCC), including DTCC's subsidiary Fixed Income Clearing Corporation (FICC).
For "Top 5 Counterparties: Reverse Repurchase and Repurchase Agreements," report the top 5 counterparties after netting (in accordance with ASC 210-20-45-1 and ASC 210-20-45-11). Where contracts have been novated to FICC, FICC should be reported as the counterparty. Where the counterparty contracted with the member through an agent (Agency Repo), report the name of the underlying principal as counterparty.
Securities Borrowed and Securities Loaned
Report the gross contract value of all securities borrowed and securities loaned agreements by collateral type, including all intercompany and third party agreements. Exclude intracompany agreements between desks within the same legal entity. Report collateral upgrade transactions based on the contract type for each leg of the transaction (i.e., report Master Repurchase Agreement contracts in the Reverse Repurchase and Repurchase Agreements section and Master Securities Lending Agreement contracts in the Securities Borrowed and Securities Loaned section).
Compute the "Weighted Average Maturity" on term agreements only (i.e., exclude open and overnight contracts).
Report in "Other Collateral" the gross contract value of all securities borrowed and securities loaned agreements not otherwise reported in the previous product categories, if applicable.
"Total Guaranteed by a CCP" shall include the gross contract value of all securities borrowed and securities loaned agreements guaranteed by a Central Clearing Counterparty.
"Top 5 Counterparties: Securities Borrowed and Securities Loaned" shall include the Top 5 Counterparties after netting (in accordance with ASC 210-20-45-1 and ASC 210-20-45-11). Where the counterparty contracted with the member through an agent bank (Agency Lending), report the name of the underlying principal as the counterparty.
Bank Loan and Other Credit Facilities
Report the dollar value of bank loan and other credit facilities (for example, subordinated loans, liens of credit, secured demand notes, etc.) by collateral type for secured lines, separating affiliated sources from unaffiliated sources.
For purposes of this SLS, a committed line of credit is one where the lender is contractually committed to lend to the member, provided the member has not violated any conditions or covenants in the terms of the contract.
Total Available Collateral (Free Box)
Report U.S. Treasury Securities (see "Explanation of Terms") in the member's possession or control that can be re-hypothecated, are otherwise unencumbered and are not required to be returned upon demand of the owner.
Margin Loans
Report margin loans, including non-purpose loans extended by the member. For purposes of this SLS, "Demand" loans are those that are callable for immediate repayment. "Term" loans are those that are not callable for immediate repayment and have stated maturity dates.
Collateral Securing Margin Loans
For "Top 5 Equity Securities," report the top five equity securities by total market value, collateralizing all margin loans.
For "Top 5 Fixed Income Securities," report the top five fixed income securities, excluding U.S. Treasury, Government Agency & Government-Sponsored Enterprise Securities, collateralizing all margin loans.
Deposits at Clearing Organizations
Report the total amount required to be on deposit, as well as the total amount of cash and securities on deposit, at clearing organizations at the report date. The amount may include the clearing deposit, adequate assurance deposits, additional liquidity deposits, guarantee fund deposits, etc. In addition, report in this section the largest single call intra-month by the clearing organization.
For "Other>10% Total," report the total clearing deposit at any one clearing organization that is greater than 10% of the total amounts required and on deposit at all clearing organizations, if applicable.
Cash and Securities Received and Delivered on Derivative Transactions Not Cleared Through a CCP
Report cash and securities used to collateralize marks to market on derivative transactions that are not cleared through a central clearing counterparty ("CCP"). For purposes of this SLS, "derivatives transactions" include non-regular way settlement transactions (including To Be Announced ("TBA") securities and delayed delivery and settlement transactions) as well as swap contracts.
For "Cash and Securities Delivered In to Collateralize Receivables," report the top five counterparties with gross derivative mark-to-market receivables, by counterparty name, and identify whether the derivative counterparty is an affiliate.
For "Cash and Securities Delivered Out to Collateralize Payables," report the top five counterparties with gross derivative mark-to-market payables, by counterparty name, and identify whether the derivative counterparty is an affiliate.
EXPLANATION OF TERMS
U.S. Treasury Securities
Direct obligations of the U.S. Treasury, including but not limited to, bills, notes, bonds, Treasury Inflation-Protected Securities (TIPS), U.S. Treasury Strips (IO) or (PO), and Treasury floating rate notes.
U.S. Government Agency & Government-Sponsored Enterprise Securities
Securities issued by a United States federal agency, or a United States Government-Sponsored Enterprise, including agency securities guaranteed as to principal or interest by the U. S. government (e.g., GNMA securities).
Equity Securities
Preferred and common stocks, warrants and ETFs issued by any domestic or foreign issuer.
Investment Grade Corporate Obligations
Investment grade debt securities issued by any corporation, whether domestic or foreign. Corporate obligations include but are not limited to non-convertible, convertible, floating rate debt securities and ETNs.
Other Collateral
All other securities not otherwise included in the other categories.
Date | Commenter |
---|---|
Vining Sparks Comment on Regulatory Notice 18-02 | |
William Blair & Co., LLC omment on Regulatory Notice 18-02 | |
SIFMA comment on Regulatory Notice 18-02 |