SEC Approves Exemptive Order and Proposed Rule Change to Permit Customer Cross-Margining in the U.S. Treasury Market

Impact. This final rule enables eligible broker-dealers to offer customers cross-margining between Treasury cash and futures positions, requiring dual registration as both broker-dealer and futures commission merchant plus joint clearing membership at FICC and CME. Your firm must implement new operational infrastructure to calculate margins across platforms while maintaining strict customer account segregation requirements.

Risk. The operational complexity of cross-platform margin calculations creates the highest exposure, particularly around real-time position monitoring and margin adequacy across different clearing systems. Examiners will focus heavily on customer protection and segregation controls given the cross-jurisdictional nature of these arrangements.

Recommended Action. Trading Operations should immediately assess current system capabilities against the Third Amended Cross-Margining Agreement requirements and identify necessary technology upgrades. Legal should begin the dual registration process with CFTC while Risk Management maps out the cross-margining calculation framework needed for April implementation.

Watch. Monitor for any FICC or CME implementation guidance on technical specifications for the cross-margining infrastructure, as these operational details will drive your system development timeline and could affect the April 15th go-live date.