FICC Fine-Tunes Bond Haircuts to Ward Off Market Meltdowns
Published Date: 3/12/2026
Notice
Summary
The Fixed Income Clearing Corporation (FICC) is updating how it calculates risk for bond trades to better protect against losses if a member can’t pay. These changes improve the math behind bond haircuts and other rules, helping keep the U.S. government securities market safer and smoother. The new rules kick in soon and won’t cost members extra but will boost financial security.
Analyzed Economic Effects
3 provisions identified: 1 benefits, 1 costs, 1 mixed.
Clearing Members May Face Higher Margins
FICC's Impact Study found that using non-zero correlations for the three short-term buckets would have increased aggregate VaR Charges by about $46 million (0.09%) on average, with the largest increase about $85 million (0.15%). At the member level, the study found an average start-of-day VaR charge increase of about $0.22 million (0.09%), a largest average percentage increase of about 14.52% ($0.38 million), and a largest average dollar increase of about $5.91 million (0.79%). Under the Margin Proxy scenario, aggregate increases would have averaged about $88 million (0.16%) with a largest increase about $163 million (0.38%).
Reduces Risk of Mutualized Losses
The Commission found the change should help FICC collect sufficient margin and better capture correlations among short-term bonds, which should reduce the likelihood FICC would need to access the mutualized Clearing Fund. That, in turn, should limit non-defaulting members' exposure to mutualized losses and support prompt, accurate clearance and settlement.
Short-Term Bond Correlations Fixed
FICC changed how it calculates correlations used in haircut (margin) models for short-term bonds. Instead of manually setting correlations to zero for Treasury 0-6 months, Treasury 6-12 months, and TIPS 0-12 months, FICC can now use index data from an alternate vendor when its designated vendor does not provide data.
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