FICC and CME Update Their Cross-Margining Pact Quietly
Published Date: 4/14/2026
Notice
Summary
The Fixed Income Clearing Corporation (FICC) and Chicago Mercantile Exchange (CME) are updating their cross-margining agreement to make it easier for certain broker-dealers to manage risk across both platforms. This change affects firms that are members of both organizations and helps them save money by reducing the amount of cash or securities they need to hold. The new rules and agreement updates are set to take effect soon, making clearing smoother and more efficient.
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Analyzed Economic Effects
8 provisions identified: 5 benefits, 3 costs, 0 mixed.
Customers Must Subordinate SIPA/Bankruptcy Claims
Cross-Margining Customers must sign a Subordination Agreement agreeing that their cross‑margined positions and margin will not receive customer treatment under SIPA or 11 U.S.C. 741 and that their SIPA/"customer property" claims will be subordinated to other customers. The agreement also makes those positions subject to applicable protections under Subchapter IV of Chapter 7 and CFTC Part 190.
Cross‑Margining Extended to Customers
FICC and CME are expanding cross-margining so certain broker-dealers that are members of both (Eligible BD-FCMs) can include customer positions ("Cross-Margining Customers") in cross-margining. FICC says this can reduce the cash or securities that those firms and their customers must hold and create capital efficiencies for participating firms and eligible customers.
Margin Reductions Calculated Per Customer; 80% Cap
FICC and CME would calculate margin reductions for Cross‑Margining Customers on a customer‑by‑customer basis and apply the same margin reduction method used for proprietary positions. Each Clearing Organization would apply the lower of the two percent reductions and any reduction is subject to a cap of 80%.
How Customer Margin Is Held and Protected
FICC will credit Cross‑Margining Customer Margin to a custody securities account in the Eligible BD‑FCM's name for the benefit of its customers, treat those assets as "financial assets" under New York's UCC, and hold them in segregated accounts at a FDIC‑insured bank and at the Federal Reserve Bank of New York. These measures are intended to keep Cross‑Margining Customer Margin out of FICC's estate if FICC became insolvent.
FICC May Keep Excess Customer Margin for Member Obligations
FICC may retain excess Cross‑Margining Customer Margin deposited by a Netting Member when that Netting Member has any outstanding payment or margin obligation arising from any Customer Positions, including those of another Cross‑Margining Customer. This affects the Netting Member's customers' excess margin.
Customer vs. Proprietary Liquidation Portfolios Separated
Under the Third A&R Agreement, Customer Positions and Proprietary Positions and their margin would be placed in separate "Liquidation Portfolios" and would not be netted against each other when calculating Net Gain or Net Loss. Clearing Organizations also may port customer positions to another clearing member in a default.
Broker‑Dealer Obligations and Security Interests
An Eligible BD‑FCM must enter into the Customer Cross‑Margining Clearing Member Agreement, indemnify and hold harmless the Clearing Organizations, unconditionally promise immediate payment of obligations related to Cross‑Margining Customers, and grant a first priority continuing security interest in positions and property to the Clearing Organizations.
Sponsored Members Allowed to Cross‑Margin
FICC proposes to remove the existing prohibition (Section 10(e) of Rule 3A) that prevented Sponsored Members from participating in the Cross‑Margining Arrangement, thereby permitting Sponsored Members to participate in customer cross‑margining.
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