SEC Approves FINRA TBA Margin Proposal

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.