SEC Approves Removal of Activity Limit for Sponsoring Members at Fixed Income Clearing Corporation (FICC)
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The SEC approved FICC's proposed rule change to eliminate the existing activity limit that prevented Sponsoring Members from submitting trades to the Sponsored Service when their Aggregate VaR Charges exceeded their Netting Member Capital. In its place, FICC will apply a "higher of" VaR calculation methodology only to Sponsored Members and Segregated Indirect Participants whose aggregate liquidity needs across all accounts exceed FICC's daily liquidity need. This higher VaR charge would then apply for the following 25 business days. An impact study showed that 95.5% of studied Sponsored Members would see an average daily VaR reduction of approximately $20.2 million (32%). The change aims to improve access to clearing services while maintaining risk management through targeted margin adjustments.
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Key Changes
- Removal of activity limit that blocked Sponsoring Members from submitting trades when Aggregate VaR Charges > Netting Member Capital
- Application of "higher of" VaR calculation only when a Sponsored Member/Segregated Indirect Participant's aggregate liquidity needs exceed FICC's daily liquidity need
- Higher VaR charge applied for the following 25 Business Days once liquidity threshold is breached
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