Order Providing Exemptive Relief ToFacilitate Cross-Margining ofCustomer Positions Cleared atChicago Mercantile Exchange, Inc. andFixed Income Clearing Corporation

Core Regulatory Relief

• Commingling of Funds: The order grants relief from section 4d of the Commodity Exchange Act (CEA), allowing BD-FCMs to hold futures customer funds in a commingled account at FICC alongside securities positions.
• Permitted Depository: While FICC is not a registered Derivatives Clearing Organization (DCO), the CFTC is permitting it to act as a permitted depository for futures customer funds under specific conditions.

How the Cross-Margining Works

• Portfolio Risk Offsets: The arrangement allows for the reduction of initial margin requirements by accounting for risk offsets between U.S. Treasury security positions (cleared at FICC) and correlated products like Treasury futures (cleared at CME).
• Margin Savings: By treating these as a single portfolio, the total initial margin required is reduced. For example, a sample portfolio’s margin could be reduced from $343.24 million to approximately $68.65 million through these offsets.
• Conservative Modeling: Both CME and FICC independently calculate margin using their own models; the arrangement then applies the more conservative result (the one requiring more margin) to ensure safety.

Customer Protections

• Bankruptcy Priority: The order is designed so that customer funds held at FICC will be treated as “customer property” in the event of a BD-FCM bankruptcy, giving cross-margining customers the same priority as other futures customers.
• Portability: FICC and CME must have rules in place that allow for the porting (transfer) of a defaulting clearing member’s customer positions and margin to a solvent member.
• Segregation: FICC must hold customer margin in a segregated account at the Federal Reserve Bank of New York (FRBNY) or an FDIC-insured commercial bank.

Market Impact

• Efficiency: The move is intended to support the SEC’s Treasury Clearing Requirement by lowering the capital costs associated with mandatory clearing.
• Liquidity: Industry groups noted that reducing duplicative margin requirements should enhance overall liquidity in the U.S. Treasury market.

Effective Date

The exemptive relief described in the order became applicable as of April 15, 2026.