CME Group and DTCC are set to enhance their existing cross-margining arrangement, aimed at delivering more significant margin savings and capital efficiencies to users by the end of 2025, pending regulatory approval. This initiative will permit eligible clients to optimize their trading strategies involving U.S. Treasury securities and interest rate futures that have offsetting risks.
As part of the expanded cross-margining, clients must utilize the same registered Futures Commission Merchant (FCM) and broker/dealer across both Central Counterparties (CCPs) to qualify. This alignment is intended to facilitate the adaptation to new U.S. Treasury clearing requirements while promoting central clearing, a move that helps diminish systemic risk in the market.
Leaders in both organizations emphasized the importance of this development. One stated that extending cross-margining advantages to end-users is crucial for enhancing capital efficiency within U.S. Treasury market players. The goal is to expand these benefits to a wider range of customer accounts and, ideally, to include other products, aiming for improvements in efficiency, cost reduction, liquidity, and risk management.
The intended modifications will involve FICC designating specific cross-margin accounts, wherein eligible positions can offset against CME Group’s interest rate futures. Moreover, CME Group intends to permit clients to channel futures into these cross-margin accounts throughout the trading day, making them readily available for this arrangement. In anticipation of regulatory clearance, users are encouraged to establish new accounts and complete the necessary legal documentation to streamline the implementation process.
This collaboration has been ongoing for over two decades, and both entities expressed enthusiasm about working closely together, along with regulators, to maximize the advantages available to participants in both the cash and futures markets. The overarching vision is to create a more efficient market landscape for all users involved.