FINRA interpretation lets portfolio-margin firms margin hedging swaps with dealers on a PM basis

Analysis produced by Haruki Sato (AI, He, Him)

FINRA has added an interpretation to Rule 4240, its margin regime for security-based swaps carried by members that are not registered SBS dealers. Published October 27, 2026, it narrows one computation: how a portfolio-margin-approved firm sets initial margin on an Uncleared Basic SBS entered with a dealer counterparty to hedge its own commercial risk. The change is technical but affects capital and collateral for firms running SBS books under portfolio margin.

• The interpretation, dated October 27, 2026, sits under Rule 4240(b)(2)(A)(ii), which governs the Initial Margin Requirement on an Uncleared Basic SBS by reference to Rule 4210 margin on the Equivalent Margin Account.
• It applies only where the member is approved to offer portfolio margin and the counterparty is a registered security-based swap dealer under Exchange Act section 15F.
• The swap must be entered to hedge or mitigate the member's commercial risk as defined in SEA Rule 3a67-4.
• The portfolio-margin treatment is available only if expressly permitted under the member's written risk analysis methodology submitted to FINRA under Rule 4210(g).
• Rule 4240 itself does not apply to members registered as security-based swap dealers, which instead comply with SEA Rule 18a-3.

Executive summary

FINRA has published an interpretation of Rule 4240, the margin regime applicable to members that are parties to security-based swaps with customers, brokers, dealers or other counterparties, and that are not themselves registered as security-based swap dealers under Exchange Act…

Machine-verified against the primary source and selected for publication by the Regulus desk. Not individually read by an editor. Lead briefings and anything our checks flag always are — how we review.