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

Impact. This rule enables broker-dealers with dual registration to offer customers cross-margining between Treasury securities positions at FICC and related futures positions at CME, requiring new account structures, clearing arrangements, and risk calculation systems. The operational lift centers on coordinating margin calculations across two clearinghouses and restructuring customer accounts to support cross-margining eligibility.

Risk. Systems integration failures present the highest exposure, particularly around real-time margin calculation synchronization between FICC and CME platforms. Dually-registered firms face examination scrutiny on risk model validation and compliance with the exemptive order's customer protection conditions, especially if cross-margining arrangements create unexpected concentration or liquidity gaps.

Recommended Action. Trading Operations should immediately assess current clearing system capabilities and initiate vendor discussions for cross-margining functionality upgrades. Risk Management needs to begin model validation planning for cross-margining calculations, while Compliance should schedule legal review of the exemptive order conditions against current customer account documentation.

Watch. Monitor industry implementation guidance from FICC and CME on technical specifications for the Third Amended Cross-Margining Agreement, expected by early 2026. Track competitor adoption timelines, as early movers may capture client flow advantages in Treasury market operations.