SEC Lifts Bond Trading Caps for Smoother Market Flows
Published Date: 3/23/2026
Notice
Summary
The Fixed Income Clearing Corporation (FICC) just got the green light to remove the activity limit for some of its members in the Government Securities Division (GSD). This means sponsoring members can now trade more freely, while certain rules will only apply to those with big trading volumes. The change kicks in soon and aims to make trading smoother without extra costs or risks.
Analyzed Economic Effects
5 provisions identified: 3 benefits, 2 costs, 0 mixed.
Smaller Intraday VaR Charges for Most Sponsored Members
FICC changed the intraday VaR methodology so the 'higher of' calculation would apply only when an indirect participant's liquidity needs exceed FICC's daily liquidity need. FICC's Impact Study (April 1, 2024 to October 31, 2025) found 95.5% of the Sponsored Members in the study would have had a reduction in their VaR Charges, with an average daily reduction of about $20.2 million (approximately 32%).
Removal of Sponsoring Member Activity Cap
On March 18, 2026 the SEC approved removing the GSD activity limit that previously stopped a Sponsoring Member from submitting activity when its Aggregate VaR Charges exceeded its Netting Member Capital. This change means Sponsoring Members can submit activity even if their Aggregate VaR Charges exceed their capital, per the amendment to GSD Rule 3A.
Higher-of Methodology Extended to Segregated Indirect Accounts
The rule change expands the application of the 'higher of' intraday VaR calculation to Segregated Indirect Participants Accounts so these accounts are monitored and risk-managed similarly to Sponsoring Member Omnibus Accounts. FICC stated the extension is because both account types record transactions submitted on behalf of indirect participants.
Liquidity Threshold Triggers 25-Business-Day Margin Change
FICC will apply the 'higher of' intraday VaR Charge to a Sponsored Member or Segregated Indirect Participant if that indirect participant's aggregate liquidity needs across all accounts exceed FICC's daily liquidity need on any Business Day. If triggered, the 'higher of' intraday VaR Charge is applied to that indirect participant for the following 25 Business Days.
Measures to Limit Mutualized Loss Exposure
The Commission found the change should allow FICC to assess margin more accurately and thus help limit non-defaulting members' exposure to mutualized losses. FICC retains tools like intraday supplemental fund deposits and the Excess Capital Ratio monitoring to manage exposures.
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