FINRA Establishes New Supplemental Liquidity Schedule (SLS)

Summary

FINRA has established a new Supplemental Liquidity Schedule (SLS).¹ The new SLS, which members subject to the requirement will need to file as a supplement to the FOCUS Report, is designed to improve FINRA’s ability to monitor for events that signal an adverse change in the liquidity risk of the members with the largest customer and counterparty exposures. FINRA is issuing this Notice to provide further information on the new requirement, which will become effective on March 1, 2022. For members subject to the requirement, the first SLS must be completed as of the end of March 2022 and will be due by May 4, 2022.

The SLS, and instructions thereto, is available in Attachment A. FINRA will make the SLS available through FINRA Gateway. 

Questions concerning this Notice may be directed to:

• Kris Dailey, Vice President, Office of Financial and Operational Risk Policy (OFORP), at (646) 315-8434 or by email;
• Kathryn Mahoney, Senior Director, OFORP, at (646) 315-8428 or by email; or
• Adam Arkel, Associate General Counsel, Office of General Counsel, at (202) 728-6961 or by email.

Background

FINRA Rule 4524 provides that, as a supplement to filing FOCUS Reports required pursuant to SEA Rule 17a-5² and FINRA Rule 2010, each member shall file such additional financial or operational schedules or reports as FINRA may deem necessary or appropriate for the protection of investors or in the public interest. FINRA has adopted the SLS pursuant to Rule 4524. 

Effective monitoring of liquidity and funding risks is an essential element of members’ financial responsibility and is an ongoing focus for FINRA’s financial supervision programs. The new SLS is tailored to apply only to members with the largest customer and counterparty exposures. The SLS is designed to improve FINRA’s ability to monitor for potential adverse changes in the liquidity risk of the members that will be subject to the requirement. Members subject to the SLS filing requirement will be required to provide detailed reporting as to their:

• reverse repurchase and repurchase agreements;
• securities borrowed and securities loaned;
• non-cash reverse repurchase and securities borrowed transactions;
• non-cash repurchase and securities loaned transactions;
• bank loan and other committed and uncommitted credit facilities;
• total available collateral in the member’s custody;
• margin and non-purpose loans;
• collateral securing margin loans;
• deposits at clearing organizations; and
• cash and securities received and delivered on derivative transactions not cleared through a central clearing counterparty (CCP).

The SLS must be filed by each carrying member with $25 million or more in free credit balances, as defined under SEA Rule 15c3-3(a)(8),³ and by each member whose aggregate amount outstanding under repurchase agreements, securities loan contracts and bank loans is equal to or greater than $1 billion, as reported on the member’s most recently filed FOCUS report, unless otherwise permitted by FINRA in writing. The SLS must be completed as of the last business day of each month and filed within 24 business days after the end of the month. A member need not file the SLS for any period where the member does not meet the $25 million or $1 billion thresholds.

The effective date for the new SLS requirement is March 1, 2022. The first SLS must be completed as of the end of March 2022 and will be due by May 4, 2022. 

FINRA will make the SLS available through FINRA Gateway. Members subject to the requirement must file the SLS using the eFOCUS system. Members may visit FINRA’s eFOCUS page for further information about user support and logging in to the eFOCUS system.  Members with questions about the eFOCUS system may contact the Help Desk at (800) 321-6273.

Endnotes