SEC opens Treasury customer cross-margining for FICC-CME cleared trades

The SEC on April 15 issued a conditional exemptive order allowing customer cross-margining between cash U.S. Treasury positions cleared by a registered clearing agency and Treasury futures positions cleared by a registered derivatives clearing organization. The SEC press release said the move covers eligible customers of dually registered broker-dealer and futures commission merchant firms that are joint clearing members.

The practical change is in the FICC-CME link. The SEC also approved a Fixed Income Clearing Corporation rule change that lets FICC enter a Third Amended and Restated Cross-Margining Agreement with CME and incorporate that agreement into the Government Securities Division rules. Before the order, the SEC said only clearing members could cross-margin CME-cleared Treasury futures with FICC-cleared cash Treasury positions.

The market impact is capital efficiency. Cross-margining can reduce redundant margin requirements when cash Treasury and Treasury futures positions offset each other. That matters because the U.S. Treasury market is moving through a broader central-clearing implementation cycle, and dealers, hedge funds and asset managers are preparing for higher operational and margin demands.

The conditional order is not a blanket waiver. It provides an exemption from the broker-dealer customer protection rule only for a broker-dealer that is also registered as an FCM with the CFTC, is a joint clearing member, and meets the order’s conditions. A related CFTC exemptive order is also expected, according to the SEC release, which means implementation depends on both securities and derivatives regulators.

The next watchpoints are the Federal Register publications, operational readiness at FICC and CME, and whether large Treasury basis-trade participants migrate client positions into the cross-margining setup. The change does not eliminate leverage risk, but it could lower the friction of hedging cash Treasury books with futures while central clearing expands.

Not investment advice. Verify all figures with primary sources before acting.