SEC Extends Review on FICC-CME Margin Pact Updates
Published Date: 12/29/2025
Notice
Summary
The Fixed Income Clearing Corporation (FICC) wants to update its cross-margining deal with CME and tweak some related rules to make things clearer and smoother. This affects traders and firms using these services by potentially improving how risks and money are managed. The review period for these changes has been extended, so the final decision is still a bit away, but it’s all about keeping the system safe and efficient.
Analyzed Economic Effects
5 provisions identified: 3 benefits, 1 costs, 1 mixed.
Customer Access to Cross‑Margining
If you are a futures customer whose positions are carried by a dually registered broker‑dealer and futures commission merchant (an Eligible BD‑FCM), the proposed Third Amended and Restated Cross‑Margining Agreement would let your FICC‑cleared and CME‑cleared positions be treated together for margin on a customer‑by‑customer basis. The Clearing Organizations would compare margin reduction percentages and apply the lower percentage, with margin reductions capped at 80% for a Combined Portfolio.
Customer Margin Segregation and Bankruptcy Protection
FICC would credit Cross‑Margining Customer Margin to a custody account in the name of the Eligible BD‑FCM for the benefit of its customers and treat those assets as "financial assets" in a securities account under New York UCC. FICC would hold Cross‑Margining Customer Margin in segregated accounts at FDIC‑insured banks and at the Federal Reserve Bank of New York so that those assets are not part of FICC's bankruptcy estate.
Eligibility and Subordination Requirement
Only an Eligible BD‑FCM (a firm registered both as a broker‑dealer with the SEC and as an FCM with the CFTC) may establish Customer Cross‑Margining Accounts. Cross‑Margining Customers must qualify as a "futures customer" under CFTC Regulation 1.3 and as a Sponsored Member or Executing Firm Customer under the GSD Rules, and must enter a Customer Agreement that includes a Subordination Agreement subordinating SIPA and certain bankruptcy claims in relation to cross‑margined positions.
Separate Default Treatment for Customer Positions
If a Joint Clearing Member defaults, Customer Positions and Proprietary Positions would form separate "Liquidation Portfolios" and be closed out and netted separately so that customer positions and associated margin cannot be used to satisfy obligations from proprietary positions. The agreement preserves separate calculations of Net Gain/Net Loss for each Liquidation Portfolio, though in limited cases Cross‑Margin VM Gains may first be applied to satisfy losses on Customer Positions.
Account Designation and Pair Limits
An Eligible BD‑FCM would be required to designate each Cross‑Margining Account as either a Customer Cross‑Margining Account or a Proprietary Cross‑Margining Account, may establish only one Pair of Cross‑Margining Accounts for each type of Indirect Participant account offered at FICC, and a Cross‑Margining Customer's positions may not be maintained in multiple Pairs of Cross‑Margining Accounts of the same Eligible BD‑FCM.
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