A New Safety Net Proposed for Government Securities Trading
Published Date: 11/10/2026
Notice
Summary
The Fixed Income Clearing Corporation (FICC) wants to create a new guaranty fund to protect against losses if a member fails to pay or other losses happen in the Government Securities Division. This change affects members who trade government securities and aims to make the system safer and more reliable. The Securities and Exchange Commission is reviewing the proposal and public comments before deciding if it will be approved.
Analyzed Economic Effects
5 provisions identified: 1 benefits, 2 costs, 2 mixed.
Clearing Fund Treatment and Margin Rule Changes
The proposal would modify GSD Rule 4 and the Margin Component Schedule to support bankruptcy-remote treatment for Clearing Fund deposits, exclude the Clearing Fund from loss mutualization, remove FICC's authority to borrow Clearing Fund deposits of non-defaulting Members, permit FICC to require additional margin deposits when a Member's stress test deficiency breaches thresholds, allow FICC to exchange a Member's Clearing Fund cash deposit for U.S. Treasury securities to provide liquidity, and eliminate fixed minimum Required Fund Deposit amounts.
New Guaranty Fund to Cover Member Losses
FICC proposes to create a Guaranty Fund at its Government Securities Division (GSD) to cover losses from a Member default or a non-default loss event and to enable bankruptcy-remote treatment for Clearing Fund deposits.
Daily Stress Testing and Cover 2 Sizing
FICC would perform daily stress testing using historical and hypothetical scenarios and size the Guaranty Fund to cover the stress test deficiency for the default of the two Netting Member Affiliated Families that would generate the largest aggregate credit exposure (a "Cover 2" requirement).
Cash-Only Guaranty Fund and Intramonth Resizing
The Proposed Rule Change would require that all deposits to the Guaranty Fund be made in cash, and it would give FICC authority to resize the Guaranty Fund on an intramonth basis if stress test deficiencies breach certain thresholds.
New Loss Allocation Rules, Cooling-Off Period, and Assessment Cap
FICC would relocate loss allocation rules to a new Rule 4C, incorporate the Guaranty Fund into loss allocation while excluding the Clearing Fund from loss mutualization, eliminate Tier One/Tier Two distinctions and exclude CCIT Members and Registered Investment Company Netting Members from loss allocation, adopt a five-day "cooling off period" for Defaulting Member Events and Declared Non-Default Loss Events, and impose an assessment cap during each cooling-off period equal to two times (200%) the Member's Guaranty Fund requirement for that Event Period instead of the current rounds system.
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