FICC and CME Update Margin Pact: Standard Wall Street Paperwork
Published Date: 4/20/2026
Notice
Summary
The Fixed Income Clearing Corporation (FICC) and Chicago Mercantile Exchange (CME) teamed up to update their cross-margining agreement, making it easier for certain broker-dealers to manage their customer positions across both platforms. These changes speed up processes and improve rules, helping eligible members save money and reduce risks. The SEC gave this update a fast-track green light, so it’s rolling out soon!
Analyzed Economic Effects
7 provisions identified: 4 benefits, 3 costs, 0 mixed.
Customers Must Subordinate SIPA/Bankruptcy Claims
To participate, a Cross‑Margining Customer must sign a Customer Agreement that includes a Subordination Agreement under which the Cross‑Margining Customer agrees that its claims under the Securities Investor Protection Act (SIPA) and certain bankruptcy customer property claims (11 U.S.C. 741) are subordinated to the claims of other customers. The Customer Agreement ties the treatment of Customer Positions and Customer Property to Subchapter IV of Chapter 7 and Part 190 of the CFTC's regulations.
Customer Cross‑Margining Is Expanded
FICC and CME will allow certain dually registered broker‑dealers and futures commission merchants ("Eligible BD‑FCMs") to cross‑margin positions cleared and carried for customers ("Cross‑Margining Customers"). The SEC approved the Proposed Rule Change on an accelerated basis, and the Customer Cross‑Margining Clearing Member Agreement becomes effective upon execution and necessary regulatory approvals from the Commission and the CFTC.
Margin Calculated Customer‑by‑Customer, 80% Cap
For Customer Cross‑Margining, FICC and CME will calculate margin reductions on a customer‑by‑customer (gross) basis and apply the same reduction methodology used for proprietary cross‑margining. Each Clearing Organization compares reduction percentages and applies the lower percentage, subject to a cap of 80% on the margin reduction.
Customer Margin Held Segregated; NYUCC Treatment
FICC will credit Cross‑Margining Customer Margin to a Cross‑Margining Customer Margin Custody Account and treat assets as "financial assets" in a "securities account" under Article 8 of the New York Uniform Commercial Code (NYUCC). FICC will hold such margin in segregated accounts at an FDIC‑insured bank and at the Federal Reserve Bank of New York to help ensure it would not form part of FICC's estate in insolvency and to allow CME to perfect its security interest.
FICC May Keep Excess Customer Margin If Member Owes
FICC may retain excess Cross‑Margining Customer Margin deposited by a Netting Member with respect to a Cross‑Margining Customer when the Netting Member has any outstanding payment or margin obligation arising from any Customer Positions, including those of another Cross‑Margining Customer.
Default Rules: Separate Portfolios and Porting
In a default, Customer Positions and Proprietary Positions form separate "Liquidation Portfolios" and will not be netted against one another when calculating Net Gain or Net Loss. The Clearing Organizations will attempt joint transfers, liquidations, or buy‑outs and may port Customer Positions to another clearing member if feasible.
Clearing Member Agreements and Indemnity Obligations
An Eligible BD‑FCM must enter into the Customer Cross‑Margining Clearing Member Agreement and related Customer Agreements before clearing, indemnify the Clearing Organizations for claims from carrying third‑party customer positions, pledge first‑priority security interests in positions and property, and may terminate participation with two business days' notice once obligations are satisfied.
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