FINRA Proposes Third Partial Amendment to TBA Margin Proposal

Commentary by Nihal Patel

FINRA proposed a Partial Amendment No. 3 to its proposal to adopt margin requirements for "to-be-announced" transactions and other forward-settling agency securities transactions (collectively, "TBAs"). The FINRA filing responds to comments received on Amendment No. 2 to the proposal.

Amendment No. 3 makes two notable changes to the proposal:

  • It increases, from $2.5 million to $10 million, the amount of gross open positions allowed for a counterparty taking advantage of an exception in the proposal from margin requirements.
  • It modifies an interpretation in the proposal that allows broker-dealers to perform risk limit determinations at the investment adviser level. Specifically, the amendment removes an exception that would have limited the interpretation if an account (or group of commonly controlled accounts) constituted more than 10% of the investment adviser's assets under management.


FINRA's latest modifications to the proposal are sensible. The increase in value of positions allowed for "cash" accounts will help to exclude lower-risk-profile customers from the burdens of the rules. Beyond these changes, FINRA continues to stick to the proposal as initially written (as it did in its last amendment and response to commenters), despite numerous comments raising more fundamental concerns with the proposal's impact.

Premium Content