New 'Haircut' Charge Hits Mortgage Risk Models
Published Date: 8/29/2025
Notice
Summary
The Fixed Income Clearing Corporation (FICC) wants to add a new charge called the 'basis risk haircut' to some of its risk models for mortgage-backed securities. This change affects financial firms using these models to calculate how much money they need to keep as a safety cushion. The update aims to better protect the market and could impact margin requirements starting soon after approval.
Analyzed Economic Effects
2 provisions identified: 0 benefits, 2 costs, 0 mixed.
Clearing Members Face Higher Margin Charges
If your firm is a member of the Fixed Income Clearing Corporation (FICC), FICC proposes adding an MBS pool/TBA basis risk haircut charge to its MBS haircut, Minimum Margin Amount (MMA), and Margin Proxy models. Over the impact study period April 1, 2024–March 31, 2025, aggregated average daily start-of-day VaR Charges would have risen by about $56.31 million (0.12%), and if Margin Proxy were deployed they would have risen by about $2.13 billion (4.94%). At the member portfolio level the average SOD VaR Charge would have increased about $0.27 million (0.31%); if Margin Proxy were deployed the average increase would have been about $10.32 million (4.04%). FICC would implement the change no later than 60 business days after Commission approval.
Smaller Firms Could Be Disproportionately Burdened
FICC states the proposal could raise Required Fund Deposits and/or Segregated Customer Margin Requirements and may burden participants that have lower operating margins or higher costs of capital. FICC warns that if Margin Proxy were deployed the burden on competition "could be significant."
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