FICC and CME Update Cross-Margining Agreement
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This update to the Cross-Margining Agreement between the Fixed Income Clearing Corporation (FICC) and the Chicago Mercantile Exchange (CME) extends cross-margining to customer positions. This change aims to promote balanced portfolios and enhance access to central clearing. Eligible broker-dealers and futures commission merchants are now required to comply with new participation criteria and agreements to facilitate these changes.
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Key Changes
- Extends cross-margining to customer positions
- Introduces new eligibility criteria and agreements for firms
- Promotes balanced portfolios and access to central clearing
Obligations
What this law requires
Eligible broker-dealers and futures commission merchants (Eligible BD-FCMs) that are common members of FICC and CME must comply with new participation criteria and agreements to participate in the extended cross-margining arrangement for customer positions.
Joint Clearing Members and Eligible BD-FCMs must designate specific accounts at FICC to be cross-margined with corresponding cross-margining accounts at CME, except for Sponsoring Member Omnibus Accounts.
Eligible BD-FCMs carrying customer positions must maintain separate margin for customer transactions in U.S. Treasury securities independent from margin for proprietary positions, as required under amended Rule 17ad-22.
FICC must incorporate the Third Amended and Restated Cross-Margining Agreement and related changes into the FICC Government Securities Division Rulebook.
Both FICC and CME must provide guaranties to each other for prompt payment of all indebtedness and obligations of Cross-Margining Participants and their Eligible Affiliates arising from or related to Eligible Positions and their liquidation, transfer, or management.