Clearing Corps Refresh Their Risk-Sharing Pact Quietly
Published Date: 5/28/2025
Notice
Summary
The Fixed Income Clearing Corporation (FICC) and Chicago Mercantile Exchange (CME) want to update their cross-margining deal to make it clearer and more efficient. This change affects traders and firms using both organizations, helping them manage risk and money better. The new agreement replaces the old one and is set to roll out soon, with no extra costs expected.
Analyzed Economic Effects
4 provisions identified: 3 benefits, 1 costs, 0 mixed.
Keeps cross‑margining for affiliates
If you are a clearing member or an eligible affiliate that uses both FICC and CME, the new agreement lets Eligible Affiliates continue to participate in cross‑margining but requires any FICC‑cleared positions of those affiliates to be recorded in an Agent Clearing Member Omnibus Account that contains exclusively the affiliates' positions. This preserves margin netting and capital efficiencies in a way that is consistent with the SEC's Separate Margining Requirement (SEC amendment dated December 13, 2023) and FICC's Separate Margining Amendments that took effect March 24, 2025.
Affiliates become jointly liable
If you are a Participating Affiliate, the agreement requires that you unconditionally promise to pay amounts owing and be jointly and severally liable for payment obligations up to the liquidation value of your positions and the value realized on any margin securing such positions. The agreement also revises security interest language so a Joint Clearing Member and each Participating Affiliate grant security interests that let FICC and CME look to affiliate positions and margin to satisfy obligations.
Customer protections preserved
The agreement limits Eligible Affiliates to entities that are Non‑Customers and requires each Affiliate Account to contain only positions of Non‑Customers; margin posted for those accounts will not be subject to segregation. This is intended to preserve the customer protections available to non‑participating customers under SIPA, the Bankruptcy Code liquidation provisions, and CFTC Part 190, so customers' priority claims to segregated property are not reduced.
Longer unwind time if terminated
The proposed agreement extends the prior written notice period to terminate the Cross‑Margining Arrangement from 30 days to 180 days. This gives FICC, CME, and cross‑margining participants up to 180 days to unwind cross‑margining relationships if either party elects to terminate.
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Department and Agencies
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