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FINRA Publishes FAQ on Covered Agency Transaction Margin Under FINRA Rule 4210

Colleen Judge
1/11/24 11:52 AM

The webpage from FINRA,, provides a detailed FAQ on the subject of Covered Agency Transaction Margin under FINRA Rule 4210. Here's a summary of the key points:

  1. Implementation Date: The amendments to FINRA Rule 4210 regarding Covered Agency Transactions, as per SR-FINRA-2021-010, are set to become effective on May 22, 2024.
  2. Definition of Covered Agency Transactions: These include To Be Announced (TBA) transactions, Specified Pool Transactions, and transactions in Collateralized Mortgage Obligations (CMOs) issued by an agency or Government-Sponsored Enterprise (GSE), with specific settlement dates.
  3. Excess Net Mark to Market Loss: The rule stipulates that members are not required to collect margin or take capital charges for counterparties' mark to market losses other than excess net mark to market losses, which is defined as a net loss exceeding $250,000.
  4. Valuation and Pricing: The FAQ addresses various scenarios regarding the valuation of Covered Agency Transactions, indicating that FINRA does not mandate a specific methodology for marking these transactions to market. It also discusses the implications of using different valuation methods for margin agreements and net capital computations.
  5. Dispute Resolution: In case of disputes over mark to market losses, the FAQ outlines the process for resolving such disputes, including timelines and methods for recalculating mark to market losses based on current market prices.
  6. Capital Charge Requirements: The FAQ details the conditions under which members are required to deduct certain amounts in their computations of net capital, depending on the nature of the counterparty and market movements.
  7. Collateral Eligibility and Valuation: It explains what qualifies as eligible collateral for margining Covered Agency Transactions and how the valuation and haircutting of such collateral should be handled.
  8. Thresholds for Net Capital Deductions: The FAQ provides guidance on how members should compute and report situations where their net capital deductions exceed certain thresholds relative to their tentative net capital.

    FINRA’s Rule 4210 FAQ,, is a comprehensive resource for understanding the nuances of margin requirements and calculations under the amended FINRA Rule 4210 (May 22, 2024 deadline), especially relevant for financial institutions and professionals dealing with Covered Agency Transactions.

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