As a result, addressing counterparty exposure to credit risk remains a priority for the regulators in their quest to secure global financial markets. Our goal is to provide meaningful and timely information to buy-side market participants, including: mutual funds, hedge funds, exchange-traded funds (ETFs) and their investment advisers; corporate end users; nonswap dealer banks; and other end users of derivatives and repurchase agreements.
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A memo from FINRA’s president announcing these changes is available here. Financial Industry Regulatory Authority, Inc. (“FINRA”) is filing with the Securities and … Covered Agency Transactions include (1) To Be Announced (TBA) transactions, inclusive of adjustable rate For additional background on FINRA Rule 4210, please see our post from earlier this year (relating to the prior round of 4210 deferral by FINRA). FINRA has indicated that it will file the proposed rule change with the SEC with a request for “immediate effectiveness,” which means that FINRA desires for the deferred implementation date to become effective immediately upon filing of the rule change by FINRA with the SEC.

However, we think that regulators should address the evolving framework in an efficient manner that shields market players from additional costs due to late blueprint amendments. This is not the first time that FINRA has indicated that it is considering amendments to 4210. A Buy-Side Guide to Regulatory and Transactional Issues Related To Derivatives and Repurchase Agreements. The Derivatives and Repo Report offers insights into regulatory and transactional issues related to derivatives and repurchase agreements. This is not the first time that FINRA has indicated that it is considering amendments to 4210.

The SEC has approved1 FINRA’s rule change amending FINRA Rule 4210 to establish margin requirements for Covered Agency Transactions. FINRA is seeking comment on proposed amendments to FINRA Rule 4210 to establish margin requirements for transactions in the To Be Announced (TBA) market.

It is expected that FINRA will revise the initial scope by proposing the following changes: December 2016 – phase 1, FINRA members to enforce written risk limit determination procedure (credit risk due diligence).

liquidity fuel for mortgage origination), they are exposed to counterparty default risk due to forward settlement dates that occur in the future (up to several months). This aspect of Rule 4210 will continue to operate in the manner provided for by the rule since December 2016, and is not affected by the proposal to defer the implementation date of the margin requirements in respect of Covered Agency Transactions to March 25, 2020. A FINRA member is a US regulated broker/dealer.


In the United States, the agency mortgage-backed securities (MBS) market is the second largest after US treasuries.

Our goal is to provide meaningful and timely information to buy-side market participants, including: mutual funds, hedge funds, exchange-traded funds (ETFs) and their investment advisers; corporate end users; nonswap dealer banks; and other end users of derivatives and repurchase agreements. Finally, and by way of background, since December 2016, broker-dealers have had to make certain risk limit determinations under FINRA Rule 4210 in respect of a customer’s trading of Covered Agency Transactions. We believe that the introduction of margin requirements on uncleared transactions and expansion of collateralization technique are key tools to mitigate risks. Late modifications in the blueprints affect an actor`s capacity to deliver a full automated solution in a timely manner and create additional operational dependencies.