Statement Summary
The Securities and Exchange Commission (SEC) has issued a conditional exemptive order allowing customer cross-margining of cash market and futures positions in U.S. Treasury securities. This order specifically permits dual-registered broker-dealers and futures commission merchants to offer cross-margining to certain customers, provided they meet specified conditions. Additionally, the SEC approved a rule change for the Fixed Income Clearing Corporation (FICC) to enter a cross-margining agreement with the Chicago Mercantile Exchange (CME), enhancing cross-margining options for customer positions. SEC Commissioner Mark T. Uyeda noted that these actions are crucial for improving liquidity and market resilience for U.S. Treasury securities. The full details will be published on SEC.gov and CFTC.gov.
Original Statement
The Securities and Exchange Commission today issued a conditional exemptive order that permits customer cross-margining of cash market positions in U.S. Treasury securities cleared by a registered clearing agency and futures positions in U.S. Treasury securities cleared by a registered derivatives clearing organization. The order provides for an exemption from the broker-dealer customer protection rule for a broker-dealer that is dually-registered as a futures commission merchant with the Commodity Futures Trading Commission (CFTC), and is a joint clearing member of the clearing agency and derivatives clearing organization, to permit the broker-dealer to make cross-margining available to certain customers in a futures account provided the conditions of the order are met.
In addition, the Securities and Exchange Commission approved a proposed rule change filed by the Fixed Income Clearing Corporation (FICC) pursuant to which it would enter into a proposed Third Amended and Restated Cross-Margining Agreement with the Chicago Mercantile Exchange Inc. (CME) and incorporate that agreement into the FICC Government Securities Division rules, along with related rule changes. The agreement would extend the availability of cross-margining to positions cleared and carried for customers by a dually registered broker-dealer and futures commission merchant that is a common member of FICC and CME. The agreement and related rules are consistent with the exemptive order. Prior to today only clearing members could cross-margin futures positions in U.S. Treasury securities cleared at CME with cash market positions in U.S. Treasury securities cleared at FICC.
“Today’s issuance of orders completes another step in the implementation of Treasury clearing,” said SEC Commissioner Mark T. Uyeda, who has been leading the SEC’s efforts in this area. “It advances the goal of both the SEC and the CFTC to unlock additional liquidity and helps ensure the market for U.S. Treasury securities remains resilient.”
The exemptive order and order approving the proposed rule change will be available on SEC.gov before publication in the Federal Register, and a related CFTC exemptive order will be available on CFTC.gov and also in the Federal Register.
