CME Group-FICC Enhanced
Cross-Margining Arrangement
CME Group & FICC
September 2023

DTCC Public (White)

CME Group-FICC Enhanced Cross-Margining▸ CME Group and FICC are working together to enhance their existing cross-margining
arrangement for the benefit of common members (and their affiliates, where applicable)
when trading U.S. Treasury Securities and CME Group interest rate futures that haveoffsetting risk exposures.

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CME Group-FICC Enhanced Cross-Margining
Current Structure

Current Methodology▸Today, the CME Group – FICC Cross-Margining
Arrangement allows for cross-margining of CME Group
interest rate futures with FICC cleared cash Treasuries.

▸FICC and CME Clearing each separately hold andmanage their own positions and collateral andindependently determine the amount of margin that it
would make available for cross-margining.

▸Operationally, the current arrangement is light touch, withno affirmative daily management required by participatingmembers.

▸Current arrangement is applicable to house (proprietary)
accounts of CME Clearing Members and FICC/GSD
Netting Members.

▸Approximately 30 members are eligible for the current
arrangement with several firms receiving some benefit oneach day.

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CME Clearing
House

FICC/GSD

Derivatives
position offsets
performed

Cash position
offsets performed

Cross Margin
ResidualPositions

ResidualPositions

CME Group-FICC Enhanced Cross-Margining

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Enhanced Methodology▸ Key Enhancements:- Introduce active management aspect applicable to CMEGroup eligible positions; passive management remains for
FICC eligible positions.
- Expand the list of CME Group eligible interest rate futures
products available for cross-margining.

Enhanced Arrangement
CME Clearing
HouseNon-Included
CME Positions

Identified CME
Positions▸ Timeline to Implementation:- Operational testing available today. FICC will offer a crossmargin report to support operational testing beginning
9/5/2023.
- Target Implementation Date: January 2024.
▸ Eligibility:- Eligibility for the arrangement remains house (proprietary)
accounts of CME Clearing Members & FICC GSD Netting
Members, however, subject to regulatory analyses andapprovals, CME Group & FICC are supportive of extending
this program beyond house accounts as part of a later
phase.

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FICC/GSD
Identified FICC
Positions

Non-Included
FICC
Positions

Combined Portfolio(File Sharing)

CME SPAN Margin
Calculations

FICC Margin
Calculations
Jointly Applylower of two% Savings

CME Margin Requirement =Eligible CME Margin x(1 – Lower % Savings)

FICC Margin Requirement =Eligible FICC Margin x(1 - Lower % Savings)

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CME Group Planned Resources & Targeted Timelines
Initial Offering

Position Transfer Automation

Margin Optimization• New report available for CME Groupand FICC/GSD XM Participating
Members daily.

• Rules-based engine creates risk
reducing transfers in equivalent
CME Group Treasury futures
positions based on the amount ofFICC allocated positions.

• CME Group to provide a multidimensional optimization processacross futures, FICC eligible
positions, and CME Cleared Swaps.

• Report maps FICC/GSD positions(CUSIP & Notional Amount) into
equivalent CME Group Treasury
futures positions.

• CME Clearing members todetermine the number of futures
position transfers to submit for offset
in the program.

DTCC Public (White)• Existing CME Group Optimizer
Software enhanced to support
automation of transfers.

• Available today for testing purposes.

• Incorporated into the CME Group
Optimizer Software algorithm tominimize total margin across all
three dimensions.

• Target Availability in 12-24 months.

CME Group-FICC Program Testing Availability▸ Testing is available in the CME Clearing New Release test environment.
▸ Firms can begin to test automated transfers with the rules-based Optimizer solution.
▸ Cross-margin savings produced in the test environment are intended to be indicative ofexpected savings in the program; provided, however, that Firms should not rely upon theresults of the hypothetical portfolios as neither CME Clearing nor FICC guarantee thesame results in an actual portfolio.

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CME Group-FICC Enhanced Cross-Margining

7Examples

CME Group Treasury Futures

FICC Treasury Securities

Savings w/ Enhanced
Cross-Margining

Position

MarginPosition

Margin$%Portfolio 1:

1,000 SEP 2yr Contracts$1,050,000($222,000,000) in 2yr Treasury Notes$943,000$1,594,400~80%

Portfolio 2:2,000 SEP 5yr Contracts$2,800,000($250,000,000) in 5yr Treasury Notes$2,900,000$4,560,000~80%

Portfolio 3:

2,000 SEP 10yr Contracts$4,000,000($270,000,000) in 10yr Treasury Notes$6,000,000$8,000,000~80%

Portfolio 4:2,000 SEP 30yr Contracts$7,800,000($334,000,000) in 30yr Treasury Bonds$13,000,000$16,640,000~80%

Note: Margin rates and savings subject to change based upon market conditions and portfolio composition

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CME Group-FICC Enhanced Cross-Margining
Next Steps▸

Participating firms to complete the following:
1.
2.
3.

▸

New account setup at CME Clearing
Complete program legal documentation
Test end-to-end workflows

Please note that the existing, passive arrangement at CME Clearing will no longer be available after
enhanced arrangement goes into production.

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CME Group Disclaimer
Neither futures trading nor swaps trading are suitable for all investors, and each involves the risk of loss. Swaps trading should only beundertaken by investors who are Eligible Contract Participants (ECPs) within the meaning of Section 1a(18) of the Commodity ExchangeAct. Futures and swaps each are leveraged investments and, because only a percentage of a contract’s value is required to trade, it ispossible to lose more than the amount of money deposited for either a futures or swaps position. Therefore, traders should only use funds
that they can afford to lose without affecting their lifestyles and only a portion of those funds should be devoted to any one trade because
traders cannot expect to profit on every trade.
CME Group, the Globe Logo, CME, Globex, E-Mini, CME Direct, CME DataMine and Chicago Mercantile Exchange are trademarks ofChicago Mercantile Exchange Inc. CBOT is a trademark of the Board of Trade of the City of Chicago, Inc. NYMEX is a trademark of New
York Mercantile Exchange, Inc. COMEX is a trademark of Commodity Exchange, Inc. All other trademarks are the property of theirrespective owners.
The information within this communication has been compiled by CME Group for general purposes only. CME Group assumes noresponsibility for any errors or omissions. Additionally, all examples in this communication are hypothetical situations, used for explanation
purposes only, and should not be considered investment advice or the results of actual market experience. All matters pertaining to rules
and specifications herein are made subject to and superseded by official CME, CBOT, NYMEX and COMEX rules. Current rules should
be consulted in all cases concerning contract specifications.
Copyright © 2023 CME Group Inc. and DTCC All rights reserved.

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9DTCC / FICC Disclaimer
Copyright © 2023 CME Group Inc. and DTCC All rights reserved.
DTCC and DTCC (Stylized) are registered and unregistered trademarks of The Depository Trust & Clearing Corporation. The services
described above are provided under the “DTCC” brand name by certain affiliates of The Depository Trust & Clearing Corporation(“DTCC”). DTCC itself does not provide such services. Each of these affiliates is a separate legal entity, subject to the laws andregulations of the particular country or countries in which such entity operates. See www.dtcc.com for a detailed description of DTCC, itsaffiliates and the services they offer.

The information and examples provided in this presentation are for general informational and indicative purposes only. DTCC assumes noresponsibility for any errors or omissions. Any statements in this presentation, like any statements regarding hypothetical scenarios, aresubject to inherent uncertainties. FICC does not undertake to update this presentation to reflect changes or events that occur after thedate of publication. The range of available actions described in this presentation and the discussion of actions that could be taken incertain scenarios are hypothetical only and not binding on any parties in any forum, including but not limited to FICC, or any of its
affiliates.

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10Thank You

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