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FINRA RULE 4210: Compliance Deadline Extended to October 2021

January 18, 2021

FINRA recently proposed extending the implementation date of certain amendments to FINRA Rule 4210, from March 25, 2021 to October 26, 2021. This was filed for immediate effectiveness; however, the SEC has not yet filed to publish this change.

According to commentary by Nihal Patel, “The amendments establish margin requirements for various types of forward-settling agency transactions, including TBAs, specified pool and collateralized mortgage obligation transactions. FINRA noted that this is not the first time it has delayed the implementation, though certain risk limit determination requirements of the amendments remain in effect.”

WHAT IS FINRA 4210?

FINRA Rule 4210 requires the implementation of mandatory margin requirements for:

  1. Specified Pool Transactions
  2. Covered Agency Transactions 
  3. TBA Transactions 

According to FINRA, this upcoming Rule “describes the margin requirements that determine the amount of collateral customers are expected to maintain in their margin accounts, including both strategy-based margin accounts and portfolio margin accounts.” It further explains the margin requirements for equity securities, fixed income securities, options, warrants and security futures. The objectives of FINRA Rule 4210 include:

  1. Address systematic risk concerns
  2. Establish monitoring of uncollected margin
  3. Promote a coherent margin requirements framework
  4. Reduce counter-party default risk exposure via collateralization process implementation   

IS YOUR FIRM PREPARED TO MEET THESE REQUIREMENTS BY OCTOBER 2021?

Matrix Applications has a solution for you. MarginCalculator is our simple, web-based platform for daily margining and solves the complex problem of margining forward-settling trades under FINRA Rule 4210, particularly TBAs, specified pools, ARMs and CMOs. This utility calculates exposure reflecting market fluctuations versus margin collateral and cash posted to mitigate such exposures. Moreover, it aggregates counterparty exposure, trade totals, margin balances and other metrics to help financial institutions comply with FINRA Rule 4210. MarginCalculator makes it very easy to handle the 3 big C’s: 

  1. Compute
  2. Control
  3. Comply

The dedicated team at Matrix Applications, along with MarginCalculator, will help your firm work smarter. Our effective on-site and remote training offerings, along with informative documentation, makes this compliance process simple. We know software just as well as the financial markets. And we are here to help.

LEARN MORE

Contact us for more information about MarginCalculator and our other offerings.

You can find us in FINRA’s Compliance Vendor Directory (CVD), a trusted source offering firms an effective way to find vendors that provide compliance-related services. 

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