The Securities and Exchange Commission (SEC) recently issued a conditional exemptive order regarding permit customer cross-margining in the U.S. Treasury Market.
The order permits customer cross-margining of cash market positions in U.S. Treasury securities cleared by a registered clearing agency. It positions future U.S. Treasury securities cleared by a registered derivatives clearing organization.
It also exempts broker-dealers that are dually registered as a futures commission merchant with the Commodity Futures Trading Commission and are a joint clearing member of the clearing agency and derivatives clearing organization from the broker-dealer customer protection rule. Exempt broker-dealers are permitted to make cross-margining available to certain customers in a futures account provided the conditions of the order are met.
The SEC also approved a proposed rule change that allows the Fixed Income Clearing Corporation (FICC) to 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.
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. Previously, 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.