DTCC has filed with US regulators to extend its existing cross-margining arrangement with CME Group to include certain end-user clients, according to a press release issued by the two organisations.
The filing was made by DTCC’s Fixed Income Clearing Corporation (FICC) with the US Securities and Exchange Commission. CME Group submitted a related filing to the Commodity Futures Trading Commission in late September. The CFTC has also published a proposed order for public comment that would grant a limited exemption required to make the arrangement available to customers, subject to specific safeguards.
The proposed expansion would allow cross-margining to be offered to end-user clients of broker-dealers and futures commission merchants that are members of both FICC and CME. The arrangement covers US Treasury securities cleared at FICC and CME interest rate futures with offsetting risk exposures.
Offsetting exposures
Under the proposal, margin requirements would be calculated on a net risk basis across the eligible positions held at the two clearing houses. This would allow offsetting exposures between cash Treasuries and interest rate futures to be recognised for margin purposes.
FICC would designate specific cross-margin accounts for eligible positions, while CME would allow futures positions to be directed into those accounts during the trading day so they can be included in the cross-margining process.
Regulatory approval is still pending. According to DTCC, end-user clients may in the meantime begin preparing by setting up accounts, completing legal documentation and testing operational workflows.
