Conditional Exemptive Relief for Cross-Margining U.S. Treasury Securities
AI-generated summary for informational purposes only. Not legal advice. See the original source for the authoritative text.
The SEC is allowing certain broker-dealers, who also act as futures commission merchants, to participate in a program that lets them cross-margin U.S. Treasury securities with related futures contracts. This program aims to reduce the costs of trading by recognizing risk offsets between these positions, but participants must adhere to specific requirements to ensure customer protection.
AI-generated summary. May contain errors. Refer to official sources for legal decisions.
Key Changes
- Exemption allows cross-margining U.S. Treasury securities with futures
- Reduces trading costs by recognizing risk offsets
- Includes specific conditions for customer protection
Obligations
What this law requires
Eligible BD-FCMs must carry all Eligible Securities Positions and Associated Margin in a futures account as defined in CFTC Rule 1.3 for and on behalf of the cross-margining customers, ensuring that these assets are treated as belonging to those customers.
Eligible BD-FCMs and their eligible customers must both agree in writing to participate in the Customer Cross-Margin Program before applying cross-margining to Eligible Customer Positions.
Eligible BD-FCMs must enter into a written non-conforming subordination agreement with each eligible customer prior to participation in the Customer Cross-Margin Program, ensuring customers acknowledge specific treatment of their assets.
Before customer participation in cross-margining, Eligible BD-FCMs must furnish a disclosure document outlining the legal framework governing transactions, including the limitations of protections under the Exchange Act and SIPA.
Clearing agencies and DCOs must file proposed changes with the Commission and CFTC to amend their rulebooks to implement a customer cross-margin program.