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

Impact. This rule enables dually-registered broker-dealer/FCMs to cross-margin customer Treasury and derivatives positions between FICC and CME, reducing overall margin requirements and freeing up capital for Treasury market activities. Your institution must implement new margin calculation systems that integrate positions across both clearinghouses and establish operational processes to manage the Third Amended Cross-Margining Agreement between FICC and CME.

Risk. Systems integration represents the primary exposure, as your margin calculation infrastructure must accurately track and net positions across two distinct clearing environments in real-time. Examiners will scrutinize customer protection controls and the operational framework supporting the exemption from traditional segregation requirements, particularly given the complexity of managing dual registration obligations.

Recommended Action. Immediately engage your Technology and Operations teams to assess current margin system capabilities and develop an integration roadmap for FICC-CME cross-margining functionality. Coordinate with Legal to review the customer protection exemption framework and ensure your compliance program addresses the enhanced oversight requirements for dual clearing relationships.

Watch. Monitor FICC and CME for technical specifications and testing timelines as they operationalize the Third Amended Cross-Margining Agreement, particularly any updates to margin calculation methodologies or risk management protocols that could affect your implementation timeline.