SIFMA Broker-Dealer on FINRA 4210 – Margin Rules for Covered Agency Transactions
Summary
SIFMA provided comments to the Securities and Exchange Commission (SEC) in response to the request for comment on SR-FINRA-2021-010 – Notice of Filing of a Proposed Rule Change to Amend the Requirements for Covered Agency Transactions Under FINRA Rule 4210 (Margin Requirements) as Approved Pursuant to SR-FINRA-2015-036 (the “Proposal”).
SIFMA appreciates the opportunity to comment on the Proposal and efforts that FINRA has made to modify aspects of Rule 4210 applicable to “Covered Agency Transactions” (such transactions are referred to herein as “CATs” and relevant provisions of Rule 4210 are referred to herein as the “CAT Margin Rules”).
In particular, SIFMA wishes to acknowledge the substantial efforts FINRA has made to engage with industry participants and to adjust the CAT Margin Rules to address concerns about competitive equality, cost and the impact on the market for mortgage securities.
Excerpt
June 15, 2021
By Electronic Mail (rule-comments@sec.gov)
J. Matthew DeLesDernier
Assistant Secretary
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549-1090
Re: SR-FINRA-2021-010: Notice of Filing of a Proposed Rule Change to Amend the Requirements for Covered Agency Transactions Under FINRA Rule 4210 (Margin Requirements) as Approved Pursuant to SR-FINRA-2015-036
Dear Mr. DeLesDernier:
The Securities Industry and Financial Markets Association (“SIFMA”)1 submits this letter to the Securities and Exchange Commission (“SEC”) in response to the request for comment on SR-FINRA-2021-010 – Notice of Filing of a Proposed Rule Change to Amend the Requirements for Covered Agency Transactions Under FINRA Rule 4210 (Margin Requirements) as Approved Pursuant to SR-FINRA-2015-036 (the “Proposal”).2
SIFMA appreciates the opportunity to comment on the Proposal and efforts that FINRA has made to modify aspects of Rule 4210 applicable to “Covered Agency Transactions” (such transactions are referred to herein as “CATs” and relevant provisions of Rule 4210 are referred to herein as the “CAT Margin Rules”). In particular, SIFMA wishes to acknowledge the substantial efforts FINRA has made to engage with industry participants and to adjust the CAT Margin Rules to address concerns about competitive equality, cost and the impact on the market for mortgage securities. Nevertheless, aspects of the Proposal continue to raise concerns for SIFMA members. As detailed below, these are divided into issues relating to (i) implementation timing; (ii) clarifications and concerns regarding a number of the important definitions in the Proposal; (iii) aspects of the new capital charge provisions; and (iv) interaction of the CAT Margin Rules with Rules 15c3-1 and 15c3-3 under the Securities Exchange Act (the “Exchange Act”).
There are also a number of larger policy questions that SIFMA urges FINRA to address. Most significantly, these are the treatment under Rule 4210 of transactions involving specified pools and Collateralized Mortgage Obligations (“CMOs”) and the manner in which the rules apply to transactions involving both an introducing firm and a clearing firm. SIFMA strongly urges FINRA to undertake further consideration of these matters, which we believe may require modification of the rules as they apply to these transactions and further clarification of the rules, and the related Exchange Act rules as they apply to clearing relationships.
1 SIFMA brings together the shared interest of hundreds of securities firms, banks and asset managers. SIFMA’s mission is to support a strong financial industry, investor opportunity, capital formation, job creation and economic growth, while building trust and confidence in the financial markets. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association. For more information, visit www.sifma.org.
2 Notice of Filing of a Proposed Rule Change To Amend the Requirements for Covered Agency Transactions Under FINRA Rule 4210 (Margin Requirements) as Approved Pursuant to SR-FINRA-2015-036, Exchange Act Release No. 91937 (May 19, 2021), 86 Fed. Reg. 28161 (May 25, 2021).