FINRA has adopted consolidated rules for margin requirements, daily record of required margin and extension of time requests under Reg. T and SEA Rule 15c3-3;  the rules become effective 12/2/10.  The new FINRA rules, in large part, were based on NASD Rule 2520, Margin Requirements, and related NASD margin rules and interpretations - NASD Rules 2521, 2522 and IM-2522.  Incorporated NYSE Rule 431 Interpretations was adopted as interpretations to new FINRA Rule 4210. 

FINRA Rule 4210, like its predecessor rules, prescribes requirements governing the extension of credit by firms that offer margin accounts to customers, as permitted in accordance with Reg. T of the Board of Governors of the Federal Reserve System.  The rule promulgates the margin requirements that determine the amount of collateral that customers are expected to maintain in their margin accounts, including strategy-based margin accounts and portfolio margin accounts.  Maintenance margin requirements for equity, fixed income, warrants and option securities are also established under the rule.

    What's Changing.   New FINRA Rule 4210 clarifies that a firm must take into account the special deductions from net capital set forth in FINRA Rule 4210, Margin Requirements, in determining its status under FINRA Rule 4120, Regulatory Notification and Business Curtailment.  FINRA restructured the consolidated rule to improve its organization and make it easier to read. 

• FINRA Rule 4210(f)(2)(A) contains streamlined definitions for margining options, currency warrants, currency index warrants and stock index warrant transactions. 
  
• FINRA also combined the margin provisions regarding currency warrants, currency index warrants and stock index warrants from NASD Rule 2520(f)(10) together with similar sections in paragraph (f)(2) of FINRA Rule 4210. 
  
• The supplementary material to FINRA Rule 4210 provides illustrations on how to calculate the number of elapsed days for accrued interest on Treasury bonds or notes.

FINRA covers the Rule 4210 following areas in greater depth:  (i) Day Trading;  (ii) Portfolio Margining;  (iii) Conforming Amendments;  (iv) Clarifying and Technical Amendments;  (v) Margin Interpretations.

    FINRA Rule 4220, Daily Record of Required Margin.   This new rule is adopted from Incorporated NYSE Rule 432(a), in substantially the same form.  The rule sets forth the requirements for daily recordkeeping of initial and maintenance margin calls that are issued pursuant to Reg. T and the margin rules.

    FINRA Rule 4230, Required Submissions of Requests for Extension of Time Under Regulation T and SEA Rule 15c3-3.   This new rule is adopted from NASD Rule 3160, with an added provision to clarify that for the months when no broker-dealer for which a clearing firm clears exceeds the extension-of-time ratio criteria specified by FINRA - currently set at 2% - the clearing firm must submit a report indicating such.  

For further details, click onto:   [ FINRA RegNote 10-45, October ]