FICC and CME Revamp Their Cross-Margining Agreement for Efficiency
Published Date: 12/29/2025
Notice
Summary
The Fixed Income Clearing Corporation (FICC) is updating its cross-margining deal with the Chicago Mercantile Exchange (CME) to make things clearer and smoother for everyone involved. These changes affect traders and clearing members who use these systems, aiming to improve risk management and efficiency. The new rules and fixes are set to roll out soon, helping save money and reduce hassle in handling trades.
Analyzed Economic Effects
5 provisions identified: 3 benefits, 2 costs, 0 mixed.
Customers Gain Cross‑Margining Access
FICC and CME propose letting customers of a dually registered broker‑dealer/futures commission merchant (an Eligible BD‑FCM) use cross‑margining. Customer positions would get the same margin reduction method as proprietary positions, calculated customer‑by‑customer, with any margin reduction capped at 80%. This is intended to expand access to clearing and allow customers to lower margin needs by combining their FICC and CME positions.
Tight Eligibility Rules to Participate
Only an Eligible BD‑FCM — a firm that is registered both as a broker‑dealer with the SEC and as an FCM with the CFTC — can open Customer Cross‑Margining Accounts. Cross‑Margining Customers must be a "futures customer" under CFTC Regulation 1.3 and be a Sponsored Member or Executing Firm Customer as defined in the GSD Rules. Firms or customers that do not meet these specific registrations or definitions cannot participate in the customer cross‑margining program.
Customer Must Sign Subordination Agreement
A Cross‑Margining Customer must enter into an agreement with its Eligible BD‑FCM that includes a Subordination Agreement. Under that Subordination Agreement the Cross‑Margining Customer agrees to subordinate its claims under the Securities Investor Protection Act (SIPA) and Subchapter III of Chapter 7 of the U.S. Bankruptcy Code in relation to its cross‑margined positions and associated margin. This is a condition for customer participation in the program.
Customer Margin Segregation and Custody Protections
FICC would credit Cross‑Margining Customer Margin to a Cross‑Margining Customer Margin Custody Account in the name of the Eligible BD‑FCM for the benefit of its customers and treat those assets as "financial assets" and a "securities account" under New York's UCC. FICC would hold these assets in segregated accounts at an FDIC‑insured bank and at the Federal Reserve Bank of New York so they do not form part of FICC's bankruptcy estate.
Separate Default Rules for Customer Accounts
Under the proposed Third A&R Agreement, Customer Positions and Proprietary Positions would form separate "Liquidation Portfolios" and would be closed‑out and netted separately so customer margin cannot be used to satisfy proprietary obligations. The agreement also provides for joint liquidation, buy‑outs, porting of customer positions, and requires that if one Clearing Organization decides not to liquidate, the Non‑Liquidating Clearing Organization can demand payment equal to certain margin reductions within one hour of demand.
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