July 2014 Board Update

FINRA Chairman and CEO Rick Ketchum is joined by lead governor Jack Brennan to review rulemaking and other issues discussed at FINRA's July Board of Governors meeting. In addition to the video, a summary of the board actions is also available.

July 10, 2014

Dear Executive Representative:

This week, the FINRA Board of Governors met to discuss a number of items, including two rule proposals. A summary of the proposals, as approved by the Board, is included below.

Please take a moment to watch my video report with Lead Governor Jack Brennan, in which we provide an overview of key issues discussed at the meeting, including an update on the CARDS proposal.

As always, your comments are welcome.

Sincerely,
 

Richard G. Ketchum
Chairman and CEO

Rulemaking Items Discussed at the July 2014 Board Meeting

NMS Plan Regarding Minimum Quoting and Trading Increments

The Board authorized FINRA to join a National Market System Plan regarding minimum quoting and trading increments ("tick sizes"), whereby selected equity securities would be subject to quoting and, in some instances, trading increments of $0.05 on a pilot basis.

TBA Market: Proposed Amendments to FINRA Rule 4210 (Margin Requirements)
The Board authorized FINRA to file with the SEC proposed amendments to FINRA Rule 4210 (Margin Requirements) to establish margin requirements for To Be Announced (TBA) transactions (inclusive of adjustable-rate mortgage transactions), Specified Pool Transactions, and transactions in Collateralized Mortgage Obligations (CMOs), with forward settlement dates (referred to broadly as the TBA market). The proposal is a modified version of the proposed amendments discussed in Regulatory Notice 14-02 that makes changes in response to comments and is designed, among other things, to create exceptions tailored to smaller customers. For example, a counterparty whose aggregate positions amount to $2.5 million or less would be excepted from the proposed margin requirements if (1) the counterparty regularly settles DVP (delivery versus payment) or for cash, (2) the original contractual settlement date for the counterparty's transactions is in the month of the trade date or in the succeeding month, and (3) the counterparty meets other specified conditions, such as not using financing techniques. The proposal also revises the originally proposed amendments as to maintenance margin, risk limit determinations and de minimis transfer amounts.