In what seems to be déjà vu, broker-dealers can (again) breathe a collective sigh of relief. The Financial Industry Regulatory Authority (FINRA) has filed a rule change with the Securities and Exchange Commission (SEC) to further delay the effective date of certain changes to its maintenance margin rule for Covered Agency Transactions (e.g., to-be-announced transactions, specified pool transactions, transactions in collateralized mortgage obligations) until March 25, 2019. Final implementation of the rule was scheduled for June 25, 2018, which itself was a delay from a previous compliance date. Please read our previous blog post for more information. The new proposal was filed for immediate effectiveness and FINRA, in delaying the rule changes, said that it would be reviewing whether any substantive changes were needed in the rule. Of note, the risk limit determinations of amended Rule 4210 that became effective on December 15, 2016, are not affected by the proposal.
In brief, FINRA announced in August 2016 the adoption of changes to Rule 4210 with respect to the treatment of “Covered Agency Transactions” that would require FINRA members that engage in covered agency transactions with counterparties to make and enforce written risk determinations for each counterparty, and subject to certain exceptions, collect maintenance margin for each counterparty based on the net long or short position by CUSIP. The requirement with respect to risk determinations has been effective since December 15, 2016 and the requirements with respect to maintenance margin were originally scheduled to become effective on December 15, 2017.