The SEC approved FINRA's proposal (as modified by partial amendment no. 3) to adopt margin requirements for "to-be-announced" transactions and other forward-settling agency securities transactions. Amendment No. 3 made two changes to the proposal (previously summarized in further detail on the Cabinet):
- It increases, from $2.5 million to $10 million, the amount of gross open positions allowed for a counterparty taking advantage of an exception in the proposal from margin requirements.
- It modifies an interpretation in the proposal that allows broker-dealers to perform risk limit determinations at the investment adviser level. Specifically, the amendment removes an exception that would have limited the interpretation if an account (or group of commonly controlled accounts) constituted more than 10% of the investment adviser's assets under management.
The SEC approved FINRA's Partial Amendment No. 3 "on an accelerated basis." According to the SEC, "the changes proposed in Amendment No. 3 do not raise any novel regulatory issues because they provide greater clarity with respect to the application of the proposed rule change and will reduce the regulatory burden on FINRA members, particularly smaller firms and counterparties."
The SEC asserted that the approved rule change will (i) promote consistent and transparent margin requirements in the TBA market for FINRA members and their counterparties, (ii) mitigate the risk that FINRA members will compete by implementing lower margin levels for Covered Agency Transactions, and (iii) help to ensure that margin levels are set at sufficiently prudent levels for all FINRA members. The SEC noted that it received 141 comment letters on the proposed rule change.
Comments on the approved proposal must be submitted 21 days after its publication in the Federal Register.
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