The SEC simultaneously approved a proposed rule change filed by the Fixed Income Clearing Corporation (FICC) to enter into a Third Amended and Restated Cross-Margining Agreement with Chicago Mercantile Exchange Inc. (CME). The agreement extends cross-margining availability to positions cleared and carried for customers by dually registered entities that are common members of both FICC and CME, incorporating the agreement into FICC's Government Securities Division rules.
Prior to this approval, only clearing members themselves could cross-margin futures positions in U.S. Treasury securities cleared at CME with cash market positions cleared at FICC. The new framework expands this capability to customer positions, allowing for more efficient capital usage across related Treasury positions in both cash and derivatives markets.
SEC Commissioner Mark T. Uyeda, who has been leading the SEC's efforts in this area, stated that the issuance of orders completes another step in the implementation of Treasury clearing. He said the move advances the goal of both the SEC and the CFTC to unlock additional liquidity and helps ensure the market for U.S. Treasury securities remains resilient.
The exemptive order provides an exemption from the broker-dealer customer protection rule specifically for this cross-margining activity. The order includes specific conditions that must be met for the cross-margining arrangements to function, though the SEC did not detail those conditions in its announcement.
The exemptive order and order approving the proposed rule change will be available on SEC.gov before publication in the Federal Register. A related CFTC exemptive order will be available on CFTC.gov and also in the Federal Register.