DTCC seeks approval to extend cross-margining to clients

DTCC has filed with the US Securities and Exchange Commission to expand a cross-margining arrangement between its Fixed Income Clearing Corporation unit and CME Group to include certain end-user clients.

The filing marks the latest regulatory step in a plan that would widen access to an existing arrangement that allows margin offsets across products cleared at the two organisations. CME Group filed with the Commodity Futures Trading Commission in late September, and the CFTC has published for comment a proposed order that would grant a limited exemption tied to the customer expansion.

Regulatory steps

FICC and CME already operate a cross-margining arrangement for common members. The proposal would extend that arrangement to end-user clients of dually registered broker-dealers and futures commission merchants that are common members of both clearing organisations.

The CFTC's proposed order describes a limited exemption that CME and FICC would need before making the arrangement available to certain customers. The proposal also sets out safeguards that would apply under the expanded model.

The expansion sits within a broader policy and market focus on clearing and margin in US fixed income and derivatives markets. It would cover US Treasury securities cleared at FICC and interest rate futures cleared at CME.

Margin offsets

Under the proposal, end-user clients would receive capital and margin efficiencies when they trade US Treasury securities and CME interest rate futures with offsetting risk exposures. The clearing organisations would calculate margin based on net risk across eligible positions.

Cross-margining links margin requirements across related positions cleared at different central counterparties, when those positions carry offsetting risk. Market participants often seek those offsets when they run interest rate risk across cash Treasuries and futures.

The proposed customer extension restricts participation to end-user clients of firms that sit in both regimes. That group includes entities registered as broker-dealers and as futures commission merchants.

Account structure

FICC plans to designate cross-margin accounts under the proposed arrangement. Those accounts would hold eligible positions that could offset against eligible CME interest rate futures within the cross-margin framework.

CME would allow participants to direct futures positions into end-user cross-margin accounts during the trading day. That feature would make those positions available for offsetting under the arrangement on an intraday basis.

Before any regulatory approval, DTCC said end-users can set up new accounts, complete programme legal documentation, and test end-to-end workflows. The organisations described these steps as preparation for operational readiness if approvals proceed.

Market plumbing

FICC sits within DTCC's clearing structure and plays a central role in clearing US government securities transactions. CME runs derivatives markets and operates CME Clearing, which clears futures and options.

The proposal targets activity where market participants commonly hedge interest rate exposures between the cash Treasury market and interest rate futures. Firms that trade both instruments often hold positions that offset in risk terms, but margins can still sit separately when positions clear at different clearing houses.

By treating the positions as a combined risk set for margin purposes, the arrangement would change how margin requirements apply across the linked accounts. That change sits alongside existing risk management rules and membership requirements at both clearing organisations.

The regulatory process now spans the SEC and the CFTC, with both agencies involved because the products and entities touch securities and futures regimes. The CFTC comment process and SEC review run in parallel, with any customer rollout dependent on approvals.

DTCC said its subsidiaries processed securities transactions valued at USD $3.7 quadrillion in 2024, and its depository subsidiary provided custody and asset servicing for securities issues valued at USD $99 trillion. CME Group operates futures and options markets across major asset classes, including interest rates, and clears trades through its central counterparty clearing services.

The agencies will now consider the filings and the proposed CFTC order as the organisations continue preparations for potential end-user participation in the cross-margining arrangement.