SIFMA Comments on FINRA-Proposed Rule on Margin Requirements for TBAs

SIFMA submitted two parallel comment letters to FINRA regarding proposed amendments to FINRA Rule 4210 ("Margin Requirements") to establish margin requirements for transactions in the "to-be-announced" ("TBA") market. Both letters express SIFMA's opposition to the proposed maintenance margin requirement and note that, if implemented, it could lead to a fragmented market that put FINRA member firms at a disadvantage. Additionally, both letters make similar recommendations regarding the scope of the new requirements and suggest, among other things, a compliance date that is at least 18 months past the effective date. In the general SIFMA letter, SIFMA makes the following additional recommendations:

• FINRA should provide clarification that margin would not be required for failed transactions;
• FINRA should codify its footnoted definition of what constitutes an exempted "central bank" and recommend an exemption for sovereign wealth funds;
• FINRA should provide further clarifications regarding the setoff of profits and losses, cured deficiencies, eligible collateral, investment advisor omnibus accounts and risk limit;
• FINRA should raise the limit for net capital deductions to 10 percent of tentative net capital for any one account or group of commonly controlled accounts, while maintaining the limit of 25 percent of tentative net capital for all accounts combined; and
• FINRA should codify its footnoted definition of an exempted "central bank."

See: SIFMA AMG Letter; SIFMA General Comment Letter; SIFMA Press Release.Related news:FINRA Proposes Amended Margin Requirements for TBAs: FINRA Regulatory Notice 14-02 (with Patel Comment) (January 27, 2014); FINRA Regulatory Notice 13-39: SEC Approved Amendments to FINRA Rule 2360 and Rule 4210 Regarding OTC Options Cleared by OCC (November 7, 2013).