The Depository Trust and Clearing Corporation (DTCC) subsidiary, Fixed Income Clearing Corporation (FICC), has filed for approval with the US’ Securities and Exchange Commission (SEC) to offer a new Collateral-in-Lieu service. If approved, the new product will be offered under its Sponsored General Collateral service.
Describing it as an enhancement to the Sponsored Service, FICC claims in a press release that Collateral-in-Lieu was designed to address the need for better margin and capital efficiency in anticipation of the US’ treasury clearing mandate.
The service’s name comes from how it works – it leverages the haircut posted by dealers to money market funds and other cash investors in tri-party via a CCP lien. This lien is typically applied in lieu of a sponsor guaranty of client performance and the posting of margin to the CCP. The service solves the double-margining challenge that results from sponsors posting haircuts to money market funds to satisfy the requirements covering overcollaterisation, as well as posting CCP margin.
The collateral management and settlement of both done-away and done-with repo trades under Collateral-in-Lieu will be supported by BNY’s tri-party infrastructure.
The launch of the service is set for December 2025, subject to regulatory approval of the filing.
