FICC Pitches Member-Funded Safety Net for Government Bond Trades
Published Date: 8/11/2026
Notice
Summary
The Fixed Income Clearing Corporation (FICC) wants to create a new safety net called a Guaranty Fund for its Government Securities Division. This fund will help protect members if something goes wrong with trades, making the system safer and more reliable. The changes could affect how much money members need to chip in, with details clarified in a recent update, and the SEC is now asking for public feedback.
Analyzed Economic Effects
10 provisions identified: 5 benefits, 4 costs, 1 mixed.
New Cash-Only Guaranty Fund, Cover‑2 Sizing
FICC will create a new, cash-only Guaranty Fund at the Government Securities Division that is sized to a Cover 2 standard (the default of the two Netting Member Affiliated Families that would cause the largest aggregate credit exposure). The Guaranty Fund will be sized using daily stress testing, set monthly, and FICC may resize it intramonth if daily stress test deficiencies breach established thresholds.
Minimum per‑member requirement ($100k–$5M; initially $1M)
Each Netting Member's Guaranty Fund requirement will be the greater of their pro rata share of the largest Cover 2 requirement over a lookback period or a Minimum Guaranty Fund Requirement set by FICC between $100,000 and $5,000,000. FICC would initially set the Minimum Guaranty Fund Requirement at $1,000,000 and will review it at least annually.
Monthly sizing with collars and intramonth authority
FICC will set the Guaranty Fund size monthly and may keep it larger than Cover 2 or apply collars to limit month-to-month moves. FICC initially proposes collars of +20% on month-over-month increases and -15% on month-over-month decreases, and retains authority to reestablish size intramonth when stress test deficiencies exceed intramonth thresholds.
Stress Test Deficiency Charges on drivers of exposure
If a Netting Member's stress test deficiencies either (i) exceed predetermined thresholds relative to other Members' Required Fund Deposits or (ii) would cause the Guaranty Fund to exceed upper bound parameters, FICC may impose a Stress Test Deficiency Charge on those Members. Charges may be collected monthly or intramonth to mitigate exposures that drive sizing increases.
Clearing Fund treated as initial margin (bankruptcy remote)
FICC will treat members' Clearing Fund deposits as initial margin and exclude the Clearing Fund from loss mutualization, supporting bankruptcy‑remote treatment for Clearing Fund deposits. FICC says this change may allow Members to reduce regulatory capital held against such deposits, providing additional capital relief.
Excluded classes and loss allocation changes
FICC will eliminate Tier One/Tier Two distinctions, exclude CCIT Members and Registered Investment Company Netting Members from loss allocation, but will include Registered Investment Company exposures in stress testing for sizing. Registered Investment Company Netting Members are excluded from Guaranty Fund allocation (except their exposures count for sizing).
New five‑day cooling‑off and 200% assessment cap
FICC shortens the Event Period to a five‑day 'cooling‑off period' for Defaulting Member Events and Declared Non‑Default Loss Events and caps each Netting Member's assessment during each Event Period at 200 percent of the Member's Guaranty Fund requirement (i.e., two times the Member's Guaranty Fund requirement).
Timing and same‑day funding deadlines
FICC expects to notify Members of monthly Guaranty Fund requirements by 11:00 a.m. ET on the first business day and require deficits to be funded by 2:45 p.m. ET the same day. For intramonth collections, FICC generally expects to notify Members by 11:00 a.m. ET and require deficits to be satisfied by 2:45 p.m. ET on the same business day.
Liquidity mechanics: no borrowing, but cash→Treasury exchange
FICC would clarify that it will no longer 'borrow' Clearing Fund deposits of non‑defaulting Members to meet liquidity needs, but it would have authority to exchange a Netting Member's Clearing Fund cash deposit for U.S. Treasury securities to provide liquidity to FICC. FICC would also file to include the Guaranty Fund and these liquidity sources in its qualifying liquid resources.
Public disclosure of stress‑test scenarios and thresholds
FICC will publish on its public website the stress test scenarios, Guaranty Fund sizing parameters, and intramonth resizing thresholds used to determine the size of the Guaranty Fund to promote transparency for Members and the public.
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