FINRA announced changes with respect to margin requirements for certain transactions in credit default swaps (CDS).  In 2009, FINRA Rule 4240 established an interim pilot program for addressing related risk monitoring procedures and guidelines. Today, FINRA makes the following announcements. 1.  FINRA has approved margin methodologies used by clearing agencies or derivatives clearing organizations for purposes of Rule 4240. 2.  FINRA has extended the Interim Pilot Program to 1/17/12. 3.  FINRA Rule 4240(a), as revised effective 7/16/11, provides in part that the Interim Pilot Program applies with respect to margin requirements for any transactions in CDS executed by a member - regardless of the type of account in which the transaction is booked. The rule’s scope includes certain transactions that are cleared through a clearing agency or derivatives clearing organization that provides central counterparty clearing services using a margin methodology approved by FINRA as announced in a Regulatory Notice (referred to in the rule as an “approved margin methodology”).  Paragraph (c)(1) of the rule addresses margin requirements that apply to CDS cleared through a clearing agency or derivatives clearing organization using such an approved margin methodology. Currently, FINRA has approved the use of the margin methodology of the central counterparty clearing facilities of the Chicago Mercantile Exchange (CME) for purposes of FINRA Rule 4240.  FINRA will consider margin methodology proposals from other clearing agencies or derivatives clearing organizations that provide central counterparty clearing services, and will announce the approval of the use of any such margin methodologies in future Regulatory Notice(s) as appropriate. FINRA expects to consider in the future whether to supersede the Interim Pilot Program with a permanent comprehensive rule governing margin requirements for all swap and security-based swap transactions effected by a member. FINRA Staff Contacts. Direct questions to:  Rudolph Verra (Risk Oversight and Operational Regulation) - (646) 315-8811;  Glen Garofalo, (Credit Regulation) - (646) 315-8464;  Steve Yannolo, (Credit Regulation) - (646) 315-8621; or  Adam Arkel (Office of General Counsel) - (202) 728-6961. For further details, go to:   [FINRA RegNote 11-31, July 2011]