SEC Order Instituting Proceedings on FICC Proposed Rule Change to Expand Cross-Margining with CME to Customer Accounts of Dual Broker-Dealer/Futures Commission Merchants
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The SEC is starting formal proceedings to decide whether to approve or disapprove a rule change filed by Fixed Income Clearing Corporation (FICC). The proposal would amend and restate the existing cross-margining agreement with the Chicago Mercantile Exchange (CME) to allow Eligible BD-FCMs (dually registered broker-dealers and futures commission merchants) to offer cross-margining benefits to their customers' positions in U.S. government securities and related futures. This would extend margin offsets currently available only to proprietary and affiliate accounts to customer accounts, aiming to reduce margin requirements and promote central clearing access for indirect participants. The SEC is examining whether the change complies with Section 17A of the Exchange Act and several provisions of Rule 17ad-22, particularly regarding risk management, margin calculation, access for indirect participants, and disclosure of risks and costs.
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Key Changes
- Extend cross-margining to customer positions cleared by Eligible BD-FCMs (dually registered broker-dealer/FCM)
- Replace existing agreement with Third Amended and Restated Cross-Margining Agreement
- Require Eligible BD-FCMs and Cross-Margining Customers to sign specific agreements in Appendix C
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