SEC Considers FINRA Options-Related Amendments to Margin Requirements
The SEC instituted proceedings to determine whether to approve a FINRA proposal that would change margin requirements for certain types of "protected" index options.
As previously covered, the proposed rule amendments to Rule 4210 ("Margin Requirements") are intended to provide margin relief for specified index option transactions, known as "protected options," to conform to Chicago Board Options Exchange (CBOE) Rule 10.3 amendments. The amendments address margin requirements related to cash-settled index options written against exchange-traded funds ("ETFs") that track the same index underlying the option.
The SEC requested comment on whether it was appropriate to extend treatment to OTC options and not just listed options and whether this would "reduce potential regulatory arbitrage that may favor listing options on certain exchanges." The SEC also asked commenters to provide examples of the types of market participants that would use the modified margin treatment - in particular - whether it would be limited to institutional investors.
Comments on the SEC order must be submitted within 21 days after publication in the Federal Register, and rebuttal comments within 35 days after publication in the Federal Register.
Commentary
It's a bit surprising to see this particular proposal receive an extended review and a second solicitation of comments. It was less than a year ago that the SEC approved a substantively identical CBOE proposal.