The Securities and Exchange Commission has granted approval of a rule change filed by the Mortgage-Backed Securities Clearing Corporation.
The rule, which changed the formula the MBSCC uses to calculate market margin differential deposits, established a baseline margin requirement for net position and net-out position risk.
"The SEC's decision to approve the MBS Clearing Corporation's rule change request regarding the formula used to calculate Market Margin Different Deposits to its Participant Fund further enhances the organization's stringent risk management policies and gives everyone additional safeguards in the event of market volatility," said MBSCC spokesman Michael Barry.
The new rule, which was proposed July 14, went into effect Nov. 30. All participants are now required to make equal deposits to the sum of "$250,000, plus all unpaid cash obligations, plus the greater of adjusted losses on all trades or 25 basis points, or such other number of basis points that MBSCC may determine, of net position and largest outstanding net-out position, less excess profits from Forward transactions multiplied by 130%, or such other percentage that MBSCC may determine," said Barry.
The SEC approved the rule, stating it was in compliance with the Securities Exchange Act of 1934 and that no comment letters were received.
MBSCC's Participants Fund is now comprised of a Participant's Basic Deposit, their Minimum Market Margin Differential Deposit, and the aforementioned Market Margin Differential Deposit.