Order on Cross-Margining Exemptive Relief for CME and FICC
AI-generated summary for informational purposes only. Not legal advice. See the original source for the authoritative text.
The law allows financial institutions that are members of both the Chicago Mercantile Exchange and the Fixed Income Clearing Corporation to combine customer funds for more efficient margining. This affects broker-dealers and futures merchants who are jointly registered, allowing them to potentially reduce costs by leveraging correlated risks across futures and securities trading.
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Key Changes
- Allows joint clearing members to commingle customer funds
- Reduces margin costs through risk offsets
- Expansion of proprietary cross-margining to include customers
Obligations
What this law requires
BD-FCMs must hold futures customer funds in a commingled customer account at FICC as per the provisions of the exemptive order.
BD-FCMs are required to ensure that customer positions and associated margin related to both securities and futures are accounted for together for margin calculation purposes.
CME must treat FICC as a permissible depository for customer funds and margin associated with futures positions under the exemptive order.
FICC must hold and record cross-margined securities positions and associated funds in accordance with the emerging cross-margining arrangement for eligible BD-FCMs.
BD-FCMs must post initial margin based on the combined portfolio using the more conservative margin calculation between CME and FICC.