FICC Redefines Risk Charge: Approved Without Fanfare
Published Date: 9/15/2025
Notice
Summary
The Fixed Income Clearing Corporation (FICC) updated how it defines the Backtesting Charge, a key part of managing financial risks for U.S. government securities trades. This change affects FICC members by clarifying margin rules to keep the market safe and sound, with no extra costs or delays expected. The Securities and Exchange Commission gave the green light on September 10, 2025, so the new rules are ready to roll.
Analyzed Economic Effects
3 provisions identified: 2 benefits, 1 costs, 0 mixed.
Intraday Margin Excluded, Raising Charges
FICC will exclude other margin amounts collected intraday from the Backtesting Charge calculations. FICC's Impact Study (June 3, 2024 through May 30, 2025) shows aggregate average daily Backtesting Charges would have increased by about $166.61 million (121.2%) for the start-of-day cycle and $137.41 million (90.3%) for the intraday cycle, which corresponds to a 0.30% increase in overall start-of-day margin and 0.25% increase for intraday margin. The study also shows 29 Members would have seen increases in the start-of-day cycle and 19 Members for the intraday cycle.
Reduces Mutualized Loss Risk
The rule change is intended to make FICC's margin calculations more conservative so FICC has more prefunded resources. That should reduce the chance that losses from a member default would exceed FICC's resources and help limit nondefaulting members' exposure to mutualized losses.
Backtesting Charge Calculation Clarified
If you are a member of the Fixed Income Clearing Corporation (FICC), the rule now explicitly says that amounts already collected as a Backtesting Charge are excluded from the backtesting coverage calculation used to set that same charge. This change only clarifies current practice so FICC can evaluate a firm's historical backtesting deficiencies more accurately.
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