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Commentary by Steven Lofchie

FINRA issued guidance on liquidity risk management practices for senior management and risk managers at firms that either hold inventory positions or clear and carry customer transactions. The guidance was based on FINRA's review of forty-three firms' practices concerning managing liquidity needs in a stressed environment. The guidance was published on FINRA's Web site. FINRA suggested that firms test for the following stresses (among others): Loss of funding from money market funds and loss of funding on the basis of collateral other than that of governments; A doubling of the margin