SEC Approves Flexible Collateral Options for Bond Trade Clearing
Published Date: 12/18/2025
Notice
Summary
The Fixed Income Clearing Corporation (FICC) is rolling out a new way for members to use different types of collateral in their Sponsored GC Service and letting sponsors clear special “done-away” trades. This change helps members manage risks and trades more flexibly, starting soon after approval. It mainly affects financial firms using FICC’s clearing services and could make their trading smoother and more efficient.
Analyzed Economic Effects
8 provisions identified: 6 benefits, 2 costs, 0 mixed.
New Collateral‑in‑Lieu (CIL) Offering
FICC will add a Collateral‑in‑Lieu (CIL) option in its Sponsored GC Service where FICC takes a lien on the Purchased GC Repo Securities instead of collecting margin or certain Funds‑Only Settlement Amounts and instead of requiring the Sponsoring Member guaranty for those CIL trades. The change is intended to help registered investment companies (RICs) and other cash providers access FICC clearing and settlement.
Minimum 2% CIL Haircut Requirement
For Sponsored GC CIL Trades, FICC would require an Initial Haircut no less than 2 percent of the Start Leg Contract Value (or another amount determined by FICC). FICC will give Netting Members at least 30 business days' notice of changes to this CIL Required Haircut.
Clearing Fund Deposit Minimum for CIL Accounts
FICC may require a Sponsored GC CIL Omnibus Account to post a Required Fund Deposit equal to the greater of $1,000,000 and the sum of applicable charges (including a VaR differential and other margin components). The VaR component is calculated as the positive difference between the VaR that would apply if these trades were in a Sponsoring Member Omnibus Account and the aggregate CIL Required Haircuts.
No Funds‑Only Settlement Payments for CIL Lenders
FICC will not pay or collect Funds‑Only Settlement Amounts to or from a CIL Funds Lender in relation to a Sponsored GC CIL Trade, although it will continue to collect such amounts from a GC Funds Borrower when applicable. This change is intended to reduce the Funds‑Only payment obligations for CIL Funds Lenders and their sponsors.
Sponsors Not Guaranteeing CIL Lender Obligations
FICC's rules will provide that, for Sponsored GC CIL Trades, the Sponsoring Member does not guarantee the Sponsored Member's obligations arising under those CIL Trades, notwithstanding earlier Sponsoring Member Guaranty language. This change removes the guaranty obligation of Sponsoring Members for CIL Funds Lender trades.
Clearing of Done‑Away Sponsored GC Trades
FICC will allow Sponsoring Members to submit 'done‑away' Sponsored GC Trades for clearing, meaning a Sponsored Member may have its counterparty be any Netting Member or Indirect Participant rather than only its Sponsoring Member. This aims to let Sponsored Members clear more eligible secondary market trades without separate clearing agreements with each execution counterparty.
Settlement Deadline Extended to 7:00 p.m.
FICC will move certain Sponsored GC Trade deadlines — full settlement of the Start Leg, substitutions of Purchased GC Repo Securities, and satisfaction of GC Collateral Return Obligations and related cash payments — from 5:30 p.m. to 7:00 p.m. New York time to align with the Fedwire Funds Service close.
CIL Joint Account Agent and Allocation Rules
FICC will permit approved CIL Joint Account Agents to represent multiple CIL Funds Lenders in a CIL Joint Account Block; each CIL Funds Lender will be entitled to and liable for its allocated portion, and the agent must notify FICC of allocation information if a CIL Funds Lender defaults. FICC will seek to exercise remedies that do not significantly harm non‑defaulting CIL Funds Lenders where feasible.
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