FINRA Rule 4210 is changing: six key questions

Investment Management Alert

The Financial Industry Regulatory Authority published a rule change in 2016 that imposes margin requirements on broker-dealers across the universe of covered agency transactions (CATs), including "To Be Announced" (or TBA) transactions and other forward-settling fixed-income transactions. 

Rule 4210 as amended implements requirements on both maintenance margin and mark-to-market (or MTM) losses (sometimes referred to as variation margin). The changes to FINRA Rule 4210 were divided into two phases:

  1. Beginning December 15, 2016, FINRA member broker-dealers had to include TBAs in their calculations for determining risk limits with their counterparties and 
  2. Beginning June 25, 2018, FINRA members must implement processes that allow for the one-way exchange of daily margin for TBAs and other CATs.
Although the implementation date for for the second phase was recently pushed out to mid-2018, firms will need to have sound operational, financial and legal processes and procedures in place to comply with the new requirements. 

To provide information about these considerations, DLA Piper partner John Grady collaborated with CloudMargin to create a paper that answers six key questions associated with the revised rule – who, what, where, when, why and how – and provides practical insights from the experienced team at CloudMargin.