Letters

SIFMA AMG on FINRA 4210 – Margin Rules for Covered Agency Transactions

Summary

The Asset Management Group of SIFMA (SIFMA AMG) provided comments to the Securities and Exchange Commission (SEC) on the consultation on amendments to FINRA’s rules governing margin requirements for covered agency transactions.

Managing counterparty credit risk is also a concern for asset managers, not just dealers, and AMG members generally support and frequently employ margining arrangements to address this risk.

SIFMA AMG has submitted a number of comment letters on this proposal over the years.

PDF

Submitted To

SEC

Submitted By

SIFMA AMG

Date

15

June

2021

Excerpt

Submitted via [email protected]

Secretary
Securities and Exchange Commission
100 F Street NE
Washington, DC 20549-1090

Dear Madam or Sir,

The Asset Management Group of SIFMA1 (“SIFMA AMG”) respectfully submits its responses to the Commission’s consultation on amendments to FINRA’s rules governing margin requirements for covered agency transactions.2 SIFMA AMG members include many of the largest and most active participants in the mortgage-backed securities markets covered by this rule and share a keen interest in the continued liquidity of these markets, which provide the funding for the majority of mortgage lending in the United States. Managing counterparty credit risk is also a concern for asset managers, not just dealers, and AMG members generally support and frequently employ margining arrangements to address this risk. SIFMA AMG has submitted a number of comment letters on this proposal over the years.3

In this letter we provide comments on certain aspects of the current proposal that are important to our members.

1. SIFMA AMG Supports the Elimination of Maintenance Margin Requirements

SIFMA AMG previously requested that FINRA eliminate the maintenance margin provisions of the rules.4 FINRA has proposed to eliminate these provisions, and we support that change.

2. SIFMA AMG Believes More Time is Needed for Implementation
FINRA has proposed that it “will announce the effective date of the proposed rule change in a Regulatory Notice to be published no later than 60 days following Commission approval. The effective date will be no later than 120 days following publication of the Regulatory Notice announcing Commission approval.”5 This lays out an implementation window of no longer than 180 days (6 months), which creates a possible scenario where the implementation period is less than six months.

1 SIFMA AMG brings the asset management community together to provide views on U.S. and global policy and to create industry best practices. SIFMA AMG’s members represent U.S. and global asset management firms whose combined assets under management exceed $45 trillion. The clients of SIFMA AMG member firms include, among others, tens of millions of individual investors, registered investment companies, endowments, public and private pension funds, UCITS and private funds such as hedge funds and private equity funds. For more information, visit http://www.sifma.org/amg.
2 Available here: https://www.federalregister.gov/documents/2021/05/25/2021-10959/self-regulatory-organizations-financial-industry regulatory-authority-inc-notice-of-filing-of-a
3 SIFMA AMG letters on 4210 covered agency transactions proposals:
2014: https://www.finra.org/sites/default/files/NoticeComment/p477653.pdf
2015: https://www.sifma.org/wp-content/uploads/2017/05/agency-mbs-1.pdf
2017: https://www.sec.gov/comments/sr-finra-2015-036/finra2015036-79.pdf
4 See, e.g. SIFMA AMG letter from March 2014: https://www.finra.org/sites/default/files/NoticeComment/p477653.pdf2
5 Proposal at 28166