Search Results for "4210"

BDA Submits Comment Letter to the SEC on FINRA 4210 Margin Amendments

In response to the SEC’s request for comment, BDA submitted the following comment letter.
BDA’s letter focuses on the following issues:
  • The legal and compliance cost burdens for middle-market dealers to implement and continue to maintain the requirements of this proposed rule
  • The fact that the proposed margin amendments will not have a fair and equitable impact on mortgage market participants and, therefore, the amendments violate Exchange Act Section 15A(b)(6)
  • BDA argues that FINRA does not have the statutory authority to adopt a margin rule for the exempt securities defined as ‘covered agency securities’ by FINRA in the proposed rule
  • BDA urges FINRA to exclude specified pools, ARMs, and CMOs from the scope of the proposed rule
  • Finally, BDA urges the SEC to disapprove the rule unless significant changes are made and FINRA’s legal authority is clarified
The original Rule 4210 margin amendments that FINRA filed with the SEC in October 2015 can be read here.
BDA submitted a comment letter to the SEC in November 2015.
BDA met with the SEC, FINRA, and key Congressional committees in January.

BDA's January 2016 Member Fly-in Focused on FINRA 4210 Margin Amendments

On Thursday January 7th, as part of BDA’s member fly-in initiative, BDA member firms and BDA staff met with the SEC, FINRA, and senior staff at the Senate Banking Committee and the House Financial Services Committee to discuss the proposed TBA, CMO, and specified pool margin amendments to Rule 4210 that FINRA filed with the SEC. BDA submitted a comment letter in October 2015. The proposed rule can be read here.
  • Erica Willems and Nick Pruhs from Baird
  • Chris Melton from Coastal Securities
  • Jason McCloud and Jeffrey Skinner from Stifel Nicolaus
  • Allen Riggs from Vining Sparks
Meetings included:
  • SEC Office of Trading and Markets
  • FINRA senior regulatory staff
  • Senate Banking Counsel
  • House Financial Services Counsel


BDA members in attendance focused on the various compliance burdens the rule presents that are listed below. In addition, BDA expressed concerns to the SEC and senior congressional staff with SRO overreach in violation of congressional intent.
  • Advocating for at least an 18 month implementation timeframe if this rule is approved.
  • The burden of establishing margin agreements with all of a dealer’s exempt and non-exempt accounts that trade mortgage products. And the fear that many dealer clients (large and small) will choose not to enter into margin agreements or that smaller dealers that do a small amount of mortgage business will chose to exit the market.
  • Managing and tracking exposures to retail clients that do not present systemic risk and will very rarely have exposures that will exceed the proposed rule’s $250,000 minimum transfer level. BDA firms also advocated for higher minimum transfer and gross open position limits.
  • The inconsistency of the margin and liquidation time requirements compared to existing rules for other securities.

BDA Submits Letter to SEC on FINRA Rule 4210 TBA Amendments

BDA has submitted its comment letter to SEC on FINRA Rule 4210, to establish margin requirements for the TBA Market.

The BDA’s letter can be read here.

BDA’s comment letter highlights that the burden of this rule will fall on small-to-medium sized dealers transacting with medium-to-large sized counterparties and focuses on the following areas of the proposed rule:

  • Raising the minimum transfer amount from $250,000 to $1,000,000
  • Raising the $2.5 million ‘gross open position’ limit to $10 million
  • Harmonizing the timing of margin and capital and liquidation with current FINRA rules
  • Amending the mortgage bankers exception language
  • Clarifying that dealers would not have to collect maintenance margin with non-exempt accounts that do not have a mark-to-market deficiency
  • Requesting a two-year period prior to the effective date
  • Requests an exemption for Fannie Mae DUS securities

The notice of proposed rule change can be found here.

FINRA Requests Comment on Proposed Amendments to FINRA Rule 4210 for Transactions in the TBA Market

The proposal addresses, among other things, maintenance margin and variation margin requirements, risk limit determinations, concentrated exposures, and exemptions for de minimis transfer amounts and for transactions cleared through registered clearing agencies. You can find the full Regulatory Notice here and the proposed rule amendment available here.

A summary of the proposed amendments follows:

  • The proposed rule change provides that all members would be required to collect variation margin for transactions in Covered Agency Securities when the current exposure exceeds $250,000;
  • Members would be required to collect maintenance margin for transactions with non-exempt counterparties;
  • The proposed amendments apply to “Covered Agency Securities,” including TBA transactions for which the difference between the trade date and contractual settlement date is greater than one business day, inclusive of ARM transactions; Specified Pool Transactions, for which the difference between the trade date and contractual settlement date is greater than one business day; and transactions in CMOs issued in conformity with a program of an Agency, for which the difference between the trade date and contractual settlement date is greater than three business days;
  • Transactions cleared through a registered clearing agency, and subject to the margin requirements of that clearing agency, will not be subject to the proposed requirements;
  • The proposal provides that for transactions with exempt counterparties, maintenance margin will not be required;
  • If variation margin is not posted to secure the mark to market loss within five business days from the date the loss was created, the member is required to promptly take liquidating action, unless FINRA grants the member an extension; and

  • The proposal provides that for transactions with non-exempt accounts, members must collect variation margin and must collect maintenance margin equal to 2 percent of the market value of the securities.

The comment period expires February 26, 2014.  The BDA will be submitting a comment letter to FINRA on these proposed amendments.  Please reach out to us if you would like to be a part of that process.

Event Recap: Market Structure Fly-In Washington, DC

This week, the BDA hosted a market structure fly-in discussing key fixed-income topics with regulators and Hill staff. The fly-in is part of a quarterly series of policy focused events in Washington DC, bringing together groups of BDA membership with regulators and Capitol Hill decision makers.

BDA Firms represented include:

  • US Bank
  • HilltopSecurities
  • RBC Capital Markets
  • Crews & Associates
  • Solve

The BDA met with representatives from the MSRB, FINRA and the SEC Offices of Municipal Securities and Trading & Markets.

Key regulatory topics discussed include:

  • 1-minute trade reporting
  • MSRB Rate Card
  • Pre-trade transparency
  • FINRA 24-02-remote work and supervision
  • FINRA Rule 4210 Implementation

As Capitol Hill turns it attention to the expiration of many provisions of the 2017 Tax Cuts and Jobs Act in 2025, the BDA took to the Hill to meet with Senate Finance Committee Majority and Minority staff and legislative staff for Senator Roger Wicker (R-MS), sponsor of the LOCAL Infrastructure Act that would fully reinstate advance refundings.

Key Legislative topics include:

  • Promotion of municipal bonds and the tax exemption
  • Restoration of advance refundings
  • Raising the BQ limit and indexing to inflation

If you are interested in participating in future fly-in’s, please let us know.  We hope this information is valuable. Please contact the BDA if you have any questions.

Brett Bolton at bbolton@bdamerica.org.

Best Practice and Operations Group

 

What Is the Best Practice and Operations Group?

The BDA’s new Best Practice and Operations Group (BPOG) has a long history supporting key personnel in establishing best practice efforts for broker/dealer operational activities.  As the industry has evolved, so have these efforts.

This group was established more than 30 years ago, originally as the Regional Municipal Operations Association (RMOA).  Due to the industry changes with rules and processing our group member participation has been reflective of those efforts.  Originally known as an operations entity, now our group includes key personnel from compliance, front office and in the smaller firms – management representatives.  We too, have undergone a name change to be as inclusive as possible to attract quality input.  In 2020, we changed our name to the Regional Fixed Income Best Practices Group, Inc. RFI/BPG which is a not-for-profit membership organization.

Today, the Best Practice and Operations Group is a collective of small, medium, and regional dealers engaged in sales and distribution and public finance of fixed income products. Our intent is to collectively solve the implementation of guidelines and rules for retail & institutional sales efforts as each rule can impact member firms differently.

The Best Practice and Operation Group’s core mission is to foster a shared understanding of operations, compliance, and regulatory intentions. Specifically, this group endeavors to address those issues which our participants are impacted regarding fixed income Operations and Compliance.

Meeting agendas are relevant and timely and are conducted in an interactive roundtable format on a 4 month rotation.

Our agenda’s focus on implementation of and compliance with current regulatory rules/guidance or potential legislative mandates. Meeting topic discussions are collaborative and may be led by various industry participants.  If a member is not familiar with a topic, they have an opportunity to learn.  If they are familiar with a topic, they accept the responsibility to share.

The Best Practice and Operations Group is proud to have the recognition and continued support by meeting participation by DTCC, FINRA, and MSRB staff.

We welcome any ideas or input on allowing other BDA firm members to actively participate.  Please direct any inquiries regarding participation to Don Winton (Crews & Associates), Randy Leeper (DA Davidson), Kathryn Phillips (The Baker Group), or John Fiore (DTCC).

We are very proud to be a part of the BDA team and look forward to working with all of our current and NEW members in a shared positive vision for our industry.

What’s New?

BPOG Spring Meeting

On March 24, 2023, we conducted a meeting during the BDA conference in Dallas.  Our early morning breakout session revolved around a number of topics presented by FINRA and MSRB market and member regulation staff, as well as the Office of Financial Responsibility and OGC.

FINRA topics included:

  • Shortening TRACE reporting deadline
  • Supervision amendments and T+1
  • Rule 4210 update – Office of Financial Responsibility
  • Exam Update: Gene Davis and John Saxton – Member Supervision
  • Market Reg Update: Chris Shull and Cris Nanu

MSRB topics included:

For Dealers:

    • Supervision and T+1
    • 1-minute trade reporting proposal
    • Rule G-32 timeline modernization
    • Rule G-47 retrospective rule review
    • Rule G-12(c) retrospective rule review

Regarding Municipal Advisor’s:

    • Rule G-3 series 50 exam requalification exemption proposal
    • Rule G-40 (testimonials) filing and Rule G-46 (solicitor municipal advisor) filing

Bonding Time: A wide-ranging conversation with Jose Fernandez, Jeff Gearhart, and Bob Mooney of Oyster Consulting

The BDA’s most recent episode of Bonding Time features a discussion with Jose Fernandez, Jeff Gearhart, and Bob Mooney of Oyster Consulting. The podcast, hosted by Michael Decker of BDA, covers:

  • Preparing for T+1 clearing and settlement
  • Best execution and the SEC’s new proposal
  • FINRA Rule 4210 and margining “extended settlement” trades
  • The latest on FINRA and MSRB trade reporting, including the proposals to shorten the trade reporting time to one minute
  • Managing turnover and attrition and more

Event Recap – Fixed Income Leadership Webinar Series

Thursday, September 9

Corporate Market Structure, New Technologies, and Liquidity Providers

The conversation focused on the evolution of electronic trading since the pandemic began, trading protocol usage, the role of non-bank liquidity providers, and what to watch in the coming year.

Speakers

Friday, September 10

Bond Market Regulation – 4210, G13, 15c2-11, Muni Advisor Rule, Corporate Syndicate Rule, and Remote Work

A discussion from senior staff of the SEC, FINRA, and MSRB on hot topics in fixed income regulation, compliance, and enforcement. We will examine issues like FINRA’s margin rule, MSRB Rule G-13 and the recent related compliance case, SEC Rule 15c2-11, and other key topics. Dan Deaton, partner at BDA member firm Nixon Peabody, will provide commentary. 

Speakers

Friday, September 10

Municipal Markets 2021 – Credit, Trading, and Issuance, Plus What to Expect from Washington, DC

We looked into current credit conditions and issuance expectations as localities continue to recover from the COVID-19 pandemic, how the pandemic has impacted muni trading, and what we can expect for the remainder of the year.  The group will also provide a discussion on the continued electrification of munis, and a legislative update including a discussion on the current status of key muni legislation in DC.

Speakers

 

For more information, please contact Mike Nicholas at mnicholas@bdamerica.org

 

Thank you to our Sponsors!

 

 

BDA’s Fixed Income Leadership Three-Part Webinar Series is NEXT WEEK

Register Today!

September 9-10, 2021

 


Thursday, September 9
Time – TBD

Corporate Market Structure, New Technologies, and Liquidity Providers

The conversation will focus on the evolution of electronic trading since the pandemic began, trading protocol usage, the role of non-bank liquidity providers, and what to watch in the coming year.

  • Kevin McPartland, Coalition Greenwich
  • David Parker, MTS Markets
  • Jim DiMonte, KeyBanc Capital Markets

Friday, September 10
10:00 am ET

Bond Market Regulation – 4210, G13, 15c2-11, Muni Advisor Rule, Corporate Syndicate Rule, Remote Work

Hear from senior staff of the SEC, FINRA, and MSRB on hot topics in fixed income regulation, compliance, and enforcement. We will examine issues like FINRA’s margin rule, MSRB Rule G-13 and the recent related compliance case, SEC Rule 15c2-11, and other key topics. Dan Deaton, partner at BDA member firm Nixon Peabody, will provide commentary.

  • Rebecca Olsen, SEC
  • Cindy Friedlander,  FINRA
  • Gail Marshall, MSRB
  • Dan Deaton, Nixon Peabody

Moderated by Michael Decker, BDA

Friday, September 10
11:00 am ET

Municipal Markets 2021 – Credit Conditions and Issuance Expectations, plus What to Expect from Washington, DC

We will look into current credit conditions and issuance expectations as localities continue to recover from the COVID-19 pandemic and what we can expect for the remainder of the year.  The discussion will also provide a legislative update and the current status of key muni legislation in DC.

  • Tom Kozlik, HilltopSecurities
  • Stephen Winterstein, MarketAxess
  • Brett Bolton, BDA

Registration Fees

*For full series of all three webinars

  • Single User – $95
  • Firm Enterprise Fee (up to 50 weblinks per firm) – $300

Please contact Rebecca Cooke-Rodriguez if you would like to change your registration at rcrodriguez@bdamerica.org

Interested in sponsoring this event?

Please contact Rebecca Cooke-Rodriguez at rcrodriguez@bdamerica.org for more information.

 

Thank you to our sponsors!

BDA Comments on FINRA Margin Proposal for Agency MBS

BDA today filed a comment letter with the SEC in regard to their consideration of a FINRA proposal to amend FINRA Rule 4210, Margin Requirements, as it applies to Covered Agency Transactions (CATs), or agency MBS trades that settle outside a T+2 window. In our letter, we told the SEC that we are “seriously concerned about the effect of the Proposal on the ability of mid-size and regional broker-dealers to compete in the market for agency mortgage-backed securities.” We told the SEC that the FINRA proposal “would consume so much of mid-size firms’ capital and cash that it would effectively impair dealers’ market function.” We urged the SEC “to reject the Proposal and direct FINRA to revise it substantially such that margin requirements do not apply to Covered Agency Transactions unless a settlement date extends beyond normal conventions.”

In our letter, we argued that excessive capital and margin charges “would stem from the inability of dealers to net certain offsetting positions against each other for purposes of the Rule.” We cited three hypothetical examples of trades involving new issues of agency MBS where total capital and margin charges to the dealer would increase by between 700 and 2000 percent under the proposal. In addition, we cited significant holes in FINRA’s economic analysis of the proposal. We also asked that firms have 18-months to comply with the Rule once finalized.

FINRA’s proposed changes to Rule 4210 originated with a 2010 recommendation from the Treasury Market Practices Group that regulators should find a way to apply margin requirements to “extended settlement” trades, or trades where the settlement period extended beyond T+2.

We will continue to press FINRA and the SEC on their 4210 initiative. Please call or write with any questions.