FICC Rolls Out Collateral Swap: Easier Bond Trading Ahead
Published Date: 9/15/2025
Notice
Summary
The Fixed Income Clearing Corporation (FICC) is rolling out a new way for members to use collateral in their Sponsored GC Service and letting sponsoring members clear special "done-away" trades between other parties. This change helps more folks join in and makes clearing smoother, with no big cost changes announced yet. If you’re a member or work with one, get ready for these fresh options coming soon!
Analyzed Economic Effects
7 provisions identified: 4 benefits, 2 costs, 1 mixed.
Possible Clearing Fund Deposit—$1M Minimum
In certain situations FICC may require a Sponsoring Member to post a Sponsored GC CIL Omnibus Account Required Fund Deposit equal to the greater of $1,000,000 and the sum of applicable charges (VaR Charge, Portfolio Differential Charge, and other charges). This requirement applies only where specific conditions are met (e.g., the account records trades for which the GC Funds Borrower is the Sponsoring Member or a Segregated Indirect Participant and that Sponsoring Member has a Segregated Indirect Participants Account).
New CIL Service to Cut “Double Margining”
FICC is creating a Collateral-in-Lieu (CIL) offering that lets a Sponsored Member (a CIL Funds Lender) grant FICC a lien on Purchased GC Repo Securities so FICC can use those securities to settle if the lender or its sponsor defaults. That lien is intended to largely remove the need for FICC to collect initial margin and to reduce the regulatory capital and funding costs Sponsoring Members face when providing access to RICs and other cash providers.
Done-Away Sponsored GC Trades Allowed
FICC will expand the Sponsored GC Service so a Sponsoring Member may submit a “done-away” Sponsored GC Trade (i.e., a repurchase trade between its Sponsored Member and another Netting Member or an indirect participant) for clearing. That change increases the pool of possible counterparties for Sponsored Members and aims to facilitate greater access to FICC clearing and settlement.
No Twice-Daily Funds-Only Payments Required
The CIL Service would not require Sponsored Members to exchange Funds-Only Settlement Amount payments with FICC for Sponsored GC CIL Trades, avoiding the twice-daily funds-only transfer requirement that many RICs and other cash providers cannot operationally support. Instead, Sponsoring Members historically would satisfy and receive such amounts, but the new service removes FICC's need to collect Funds-Only Settlement Amounts for these trades.
Minimum 2% Initial Haircut Requirement
FICC will require a Sponsored GC CIL Trade to have an Initial Haircut no less than 2 percent of the Start Leg Contract Value (the “CIL Required Haircut”), or such other amount FICC determines, and FICC will give Netting Members at least 30 Business Days' notice of changes. This haircut is intended to provide resources to address default or liquidation scenarios where FICC cannot otherwise rely on alternative resources.
Sponsor Liability: Less Guarantee, But Termination Risk
FICC proposes that, generally, a Sponsoring Member would not guarantee the obligations of a Sponsored Member arising under a Sponsored GC CIL Trade (reducing the sponsor's guaranty exposure). However, if a Sponsoring Member exercises its termination rights under Rule 3A Section 16 to close out done-with Sponsored GC CIL Trades, the Sponsoring Member would be responsible for any Sponsored Member Liquidation Amount owed by the CIL Funds Lender.
Submit Joint-Account Trades Before Allocation
Under the CIL Service, a Sponsoring Member may submit Sponsored GC CIL Trades that were executed through a joint trading account even if the investment adviser has not yet completed the allocation among participants. This change addresses timing mismatches where allocations often cannot be completed before FICC's submission deadline and should let more joint-account transactions be cleared.
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