Regulatory Notice 16-31

SEC Approves Amendments to FINRA Rule 4210 (Margin Requirements) to Establish Margin Requirements for Covered Agency Transactions

Effective Date of Risk Limit Determination Requirements: December 15, 2016; Effective Date of All Other Requirements: December 15, 2017

Executive Summary

The SEC has approved FINRA’s rule change amending FINRA Rule 4210 to establish margin requirements for Covered Agency Transactions. Covered Agency Transactions include (1) To Be Announced (TBA) transactions, inclusive of adjustable rate mortgage (ARM) transactions, (2) Specified Pool Transactions and (3) transactions in Collateralized Mortgage Obligations (CMOs), issued in conformity with a program of an agency or Government-Sponsored Enterprise (GSE), with forward settlement dates, as discussed more fully in this Notice.

This Notice provides an overview of the rule change. The rule change becomes effective in two phases:

  • The amendments relating to the risk limit determination requirements are effective on December 15, 2016. These are shown in Appendix A.
  • All other amendments pursuant to the rule change go into effect on December 15, 2017. Appendix B shows the complete text of the amendments as effective on that date.

Questions regarding this Notice should be directed to:

  • Kris Dailey, Vice President, Risk Oversight & Operational Regulation (ROOR), at (646) 315-8434;
  • Robert Mendelson, Senior Advisor, ROOR, at (646) 315-8660;
  • Peter Tennyson, Director, ROOR, at (646) 315-8403;
  • Adam Arkel, Associate General Counsel, Office of General Counsel, at (202) 728-6961.

Questions may also be directed to Covered Agency Margin. FINRA will publish additional guidance as appropriate to address questions that FINRA receives.