Margin and Collateral Requirements
- For cleared SBS transactions (transactions cleared through a clearing agency), members must maintain the margin (collateral) required by the clearing agency.
- For uncleared SBS transactions (transactions that are not cleared through a clearing agency), members must calculate daily:
- current exposure, or the amount one party currently owes the other based on changes in market value; and
- initial margin, meaning collateral designed to cover potential future losses.
Collection and Maintenance of Collateral
Members must:
- Exchange variation margin (collateral used to cover current exposure).
- Collect initial margin when required to protect against future risk.
- Collect required collateral from parties whose uncleared SBS obligations the member guarantees.
Collateral must be:
- Collected or delivered no later than the next business day after it is calculated.
- Addressed promptly if there is a shortfall, including reducing or liquidating positions if necessary.
Members may not return initial margin or allow withdrawals that would create or increase a collateral deficiency.
Approved Margin Methodologies
- Members may not enter into a type of SBS unless FINRA has approved a method for determining the required initial margin.
- FINRA’s approval may be subject to conditions or limitations.
