FINRA Rule 4210
The Securities and Exchange Commission approved proposed amendments to FINRA Rule 4210 to establish margin requirements for certain covered agency transactions, including:
The margin requirements imposed under Rule 4210 will take effect beginning on December 15, 2017.
Historically, organizations were not required to post margin on TBA transactions. The amended rule requires broker-dealers to collect maintenance and variation margin, and establish risk limits for covered agency transactions. Maintenance margin requirements are equal to two percent of the contract value of the counterparty’s net long or net short position, plus any net mark-to-market loss.
For many organizations, the exchanging of the mark to market collateral in support of these covered agency transactions is common practice; however, we anticipate that more institutions will need to adapt their process to comply with this upcoming regulation. Northern Trust offers a collateral management outsourcing service to assist will assist in the operational burden. Within this service, we will:
The full text of this amended rule that includes additional details can be found on the FINRA’s website. For more information, please contact your relationship manager.
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