Exam Alert: FINRA amends margin requirements

Effective October 26, 2012, FINRA has changed its rules regarding margin requirements for option spread strategies. Effective January 23, 2013, FINRA will make additional changes to its margin requirement rules. Continue reading

Effective October 26, 2012, FINRA has changed its rules regarding margin requirements for option spread strategies. The changes include the following:

-Definition of a spread: the prior rule used to define several different types of spreads (e.g. butterfly spread, condor spread, calendar spread). The new rule just provides one definition for spreads overall, along with a separate definition for box spreads.  For a set of options to be considered a “spread”, they must all be: on the same security, all American-style or all European-style, and all listed or all OTC. In addition, the aggregate underlying contract value of the “long” options must equal that of the “short” options and the “short” options must expire on or before the date the “long” options expire.

-Margin for options within spreads: long options within spreads must be paid in full. The margin requirement for a short option within a spread is the lesser the normal requirement for the option and the maximum potential loss of the spread.

 

Effective January 23, 2013, FINRA will make additional changes to its margin requirement rules.  The changes include the following:

-Non-margin eligible equity securities: FINRA will clarify and modify how non-margin securities held in a margin account interact with the maintenance margin requirement. The maintenance margin requirement for non-margin securities is 100% of market value. Firms cannot extend maintenance loan value on non-margin securities except under specific conditions.

-Free-riding: FINRA will eliminate the exception to the free-riding rule for “designated accounts.”

-Exempt accounts: FINRA will eliminate an outdated definition of “exempt account.”

-Stress testing: FINRA will delete the requirement to stress test portfolio margin accounts in aggregate. Firms must still stress test individual portfolio margin accounts.

 

Source: SEC Approves Amendments to FINRA Rule 4210 (Margin Requirements) [FINRA Regulatory Notice 12-44]

This alert applies to the Series 24, Series 62, Series 99, and Series 7.

Exam Alert: FINRA modifies and delays implementation of maintenance margin requirements for non-margin eligible equity securities

The changes previously mentioned in this exam alert have been pushed back from July 1, 2011, to October 3, 2011. In addition, a provision regarding Continue reading

The changes previously mentioned in this exam alert have been pushed back from July 1, 2011, to October 3, 2011.  In addition, a provision regarding the day-trading of non-margin eligible equity securities has been modified.  Instead of requiring that firms cancel certain customer trades, firms will need to restrict the day-trading activity of customers who fail to meet a day-trade call.

Source: FINRA Regulatory Notice 11-30

Exam Alert: FINRA clarifies maintenance margin requirements for non-margin eligible equity securities

FINRA has clarified what the customer maintenance margin requirements are for equity securities that are not considered margin securities under Continue reading

FINRA has clarified what the customer maintenance margin requirements are for equity securities that are not considered margin securities under Regulation T.  The FINRA notice also clarifies that the maintenance loan value of non-margin eligible equity securities may only be applied to a maintenance margin deficiency, and cannot be used for additional transactions or withdrawals.  Firms have until July 1, 2011, to comply with these requirements. Relevant to the Series 7, Series 62 and Series 24 exams.

http://www.finra.org/Industry/Regulation/Notices/2011/P123451