DTCC, CME Get Regulatory Nod to Expand Cross Margining

The Depository Trust and Clearing Corporation and CME Group say they have received regulatory approval from US regulators SEC and CFTC for an expanded cross-margining arrangement, designed to create additional capital efficiencies for market participants.

From 30 April, the firms will extend cross-margining to end-user clients of dually-registered broker/dealers and futures commission merchants (FCMs) that are common members of both the DTCC’s Fixed Income Clearing Corporation (FICC) and CME. This means, they add, that those clients can benefit from increased capital and margin efficiencies when clearing transactions in US Treasury securities through FICC and interest rate futures through CME when those transactions have offsetting risk exposures. 

Under the arrangement, FICC will designate cross-margin accounts, allowing all eligible positions in the account to offset with eligible CME interest rate futures. CME Clearing allows participants to direct futures to end-user cross-margin accounts throughout the day, thereby making them available for offset in the cross-margin arrangement.  

Clients active in trading US Treasury and interest rate derivatives will be able to offset eligible positions across both clearinghouses, reducing margin requirements, freeing up capital and improving liquidity.  

“The importance of efficient cross-margining opportunities across US Treasury securities and futures activity is critical as centrally-cleared US Treasury activity continues to grow,” says Frank La Salla, president and CEO of DTCC. “Our current cross-margining arrangement with CME Group has a proven track record of creating an average of $1 billion across both clearing houses in risk offsets every day, and we expect the end-user cross margin effort will lead to additional offsets for the industry. We are delivering meaningful margin and capital efficiency benefits for end-user clients, while helping our members support more effective risk management across cash US Treasuries and interest rate futures.” 

Terry Duffy, CME Group chairman and CEO, adds, “The extension of our cross-margining partnership to client accounts comes at a pivotal moment for US Treasury market participants. With the SEC’s central clearing mandates now taking effect, cross-margining is essential — not only for operational efficiency, but to help end users manage the real costs of compliance.”