MARGIN

General

Updates to Interpretations of FINRA’s Margin Rule Regarding Control and Restricted Securities and Consolidation of Accounts

FINRA Rule 4210 (Margin Requirements) prescribes requirements governing the extension of credit by members. The FINRA Rule 4210 interpretations provide further guidance regarding application of the rule. This Notice announced immediately effective clarifications of interpretations of (1) FINRA Rule 4210(e)(8), which specifies margin requirements for control and restricted securities, and (2) FINRA Rule 4210(f)(5), which specifies conditions for the consolidation of two or more accounts carried for the same customer.

FINRA Regulatory Notice 20-22 (July 02, 2020): Updates to Interpretations of FINRA’s Margin Rule Regarding Control and Restricted Securities and Consolidation of Accounts

 

Exchange-Traded Notes

Pursuant to FINRA Rule 4210(f)(8)(A), FINRA established higher strategy-based margin requirements for exchange-traded notes (ETNs) and options on ETNs in light of the complex nature of these products. The requirements for initial and maintenance margin are detailed in the Notice. In addition, FINRA clarified that ETNs and options on ETNs are not eligible for portfolio margining under FINRA Rule 4210(g).

FINRA Regulatory Notice 19-21 (July 1, 2019): Margin Requirements for Exchange-Traded Notes

 

Covered Agency Transactions

FINRA amended FINRA Rule 4210 to establish margin requirements for Covered Agency Transactions. Covered Agency Transactions include (1) To Be Announced transactions, inclusive of adjustable rate mortgage transactions, (2) Specified Pool Transactions and (3) transactions in Collateralized Mortgage Obligations, issued in conformity with a program of an agency or Government-Sponsored Enterprise, with forward settlement dates, as discussed more fully in Regulatory Notice 16-31. To assist members in complying with the rule change, FINRA announced in Regulatory notice 17-28 a set of frequently asked questions and guidance. In addition, FINRA extended, to March 25, 2020, the effective date of the requirements that otherwise would have become effective on March 25, 2019. Members should note that the risk limit determination requirements became effective on December 15, 2016 and are not affected by Regulatory Notice 19-05.

FINRA Regulatory Notice 19-05 (February 12, 2019): FINRA Extends Effective Date of Margin Requirements for Covered Agency Transactions

• FINRA Regulatory Notice 17-28 (September, 2017):  FINRA Makes Available Frequently Asked Questions and Guidance and Extends Effective Date of Margin Requirements for Covered Agency Transactions

• Responses to Frequently Asked Questions Regarding Covered Agency Transactions Under FINRA Rule 4210 (Updated November 1, 2019) 

FINRA Regulatory Notice 16-31 (August 2016):  SEC Approves Amendments to FINRA Rule 4210 (Margin Requirements) to Establish Margin Requirements for Covered Agency Transactions

 

FINRA Topic Page:  Margin Accounts and Requirements