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FINRA Proposes One-Year Delay of TBA Margin Requirements

Steven.Lofchie@cwt.com's picture
Commentary by Steven Lofchie

FINRA proposed extending the implementation date for certain amendments to FINRA Rule 4210 ("Margin Requirements") relating to "Covered Agency Transactions." The implementation date is proposed to be extended from March 25, 2019, to March 25, 2020. In the filing, FINRA said it is considering further amendments to the requirements for "to be announced" or "TBA" transactions and other forward-settling agency securities transactions.

FINRA noted that amendments related to the risk limit determination requirements (see previous coverage) that became effective on December 25, 2016 will not be impacted by the proposed rule change. The current filing seeks immediate effectiveness of the rule proposal upon its publication by the SEC.

Commentary

The delay was motivated, at least in part, by concerns as to the substantive requirements of the regulations. Accordingly, FINRA should be receptive to comments on the substantive requirements.

If the world operated in some logical fashion (and if horses had wings), TBA margin rules should be put on hold so that their adoption and implementation could be coordinated with the security-based-swap margin rules given the similarities of the issues (i.e., margin on both TBAs and on security-based-swaps is margin on an unsettled "transaction" as opposed to margin on a collateralized product held in custody).

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