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

Impact. Your firm now has access to customer cross-margining capabilities between Treasury cash and futures positions, allowing customers to offset margin requirements across both markets through a single clearing arrangement. This requires dual registration as both broker-dealer and futures commission merchant, joint clearing membership with FICC and CME, and compliance with the Third Amended Cross-Margining Agreement's operational framework.

Risk. Operations and technology functions face the highest exposure given the complexity of implementing dual-market clearing systems and customer account structures. Examination teams will scrutinize whether your cross-margining controls properly segregate customer funds and maintain appropriate risk monitoring across both Treasury cash and futures positions.

Recommended Action. Trading and Operations leadership should immediately assess your current clearing arrangements and determine whether pursuing joint FICC-CME membership aligns with your business strategy. If moving forward, engage legal counsel to review the exemptive order conditions and begin mapping system requirements for cross-margining account structures.

Watch. Monitor early implementation experiences from other dually-registered firms, particularly around operational challenges and examination findings. Track any SEC or CFTC guidance addressing cross-margining compliance issues as the market adapts to these new capabilities.