The SEC Published Rule 4210 Amendments to the Federal Register

On May 25, 2021, The Securities Exchange Commission (SEC) published the amendments of FINRA Rule 4210 to the Federal Register.

The Financial Regulatory Authority (FINRA) has proposed to amend the requirements for Covered Agency Transactions under FINRA Rule 4210 (Margin Requirements) as approved by the SEC.

The text of the proposed rule change is available on FINRA's website at http://www.finra.org, at the principal office of FINRA and at the Commission's Public Reference Room.

According to the Federal Register, a summary of FINRA's proposed amendments are as follows:

• To eliminate the two percent maintenance margin requirement that applies to non-exempt ^[18] accounts pursuant to paragraph (e)(2)(H)(ii)e. under Rule 4210. This would eliminate the need for members to distinguish exempt account customers from other customers (“non-exempt accounts”) for purposes of Covered Agency Transaction margin. As such, without regard to a counterparty's exempt or non-exempt account status, members would collect margin for each counterparty's excess mark to market loss, as discussed in further detail below, unless otherwise provided by the rule;

• Subject to specified conditions and limitations, to permit members to take a capital charge in lieu of collecting margin for excess net mark to market losses on Covered Agency Transactions. These conditions and limitations are designed to help protect the financial stability of members that opt to take capital charges while restricting the ability of the larger members to use their capital in lieu of collecting margin to compete unfairly with smaller members; and
  
  
• To make revisions designed to streamline, consolidate and clarify the Covered Agency Transaction rule language. These revisions will preserve and clarify key exceptions to the requirements, including for example the $250,000 de minimis transfer exception ^[19] and the $10 million gross open position exception ^[20] established pursuant to SR-FINRA-2015-036.

To read the full Federal Register notice by the SEC, click here. 

Is Your Firm Prepared For Rule 4210?

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.