Notice2026-07636
Order Under Section 36 of the Securities Exchange Act of 1934 (the “Exchange Act”) Granting Conditional Exemptive Relief from Section 15(c)(3) of and Rule 15c3-3 Under the Exchange Act for Cross-Margining of Cleared U.S. Treasury Securities and Related Futures
Primary source
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Published
April 20, 2026
Issuing agencies
Securities and Exchange Commission
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<title>Federal Register, Volume 91 Issue 75 (Monday, April 20, 2026)</title>
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[Federal Register Volume 91, Number 75 (Monday, April 20, 2026)]
[Notices]
[Pages 21035-21041]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-07636]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-105248; File No. S7-2026-03]
Order Under Section 36 of the Securities Exchange Act of 1934
(the ``Exchange Act'') Granting Conditional Exemptive Relief from
Section 15(c)(3) of and Rule 15c3-3 Under the Exchange Act for Cross-
Margining of Cleared U.S. Treasury Securities and Related Futures
April 15, 2026.
I. Introduction
A. Overview of Exemptive Order
The Securities and Exchange Commission (``Commission'' or the
``SEC'') is granting exemptive relief, subject to the conditions
discussed below, pursuant to Section 36 \1\ of the Exchange Act to
broker-dealers registered under Section 15(b) of the Exchange Act \2\
that are dually-registered as futures commission merchants (``FCMs'')
pursuant to Section 4f(a)(1) of the Commodity Exchange Act (``CEA'')
\3\ (``BD-FCMs'') from compliance with Section 15(c)(3) of the Exchange
Act \4\ and Rule 15c3-3 \5\ thereunder in connection with a program to
cross-margin U.S. Treasury securities cleared by a clearing agency that
is registered under Section 17A of the Exchange Act \6\ (``clearing
agency'') and related futures contracts cleared by a derivatives
clearing organization registered under Section 5b of the CEA \7\
(``DCO'') for purposes of calculating clearing agency
[[Page 21036]]
and DCO initial margin requirements. The cross-margin program would be
available to customers of a BD-FCM that also is a joint clearing member
of a clearing agency that clears U.S. Treasury securities positions and
a member of a DCO that clears related futures contracts (``Eligible BD-
FCMs'').
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\1\ 15 U.S.C. 78mm. Section 36(a)(1) of the Exchange Act gives
the Commission the authority to exempt any person, security or
transaction or any class or classes of persons, securities or
transactions, conditionally or unconditionally, from any Exchange
Act provision by rule, regulation or order, to the extent that the
exemption is necessary or appropriate in the public interest and
consistent with the protection of investors.
\2\ 15 U.S.C. 78o(b).
\3\ 7 U.S.C. 6f(a)(1).
\4\ 15 U.S.C. 78o(c)(3).
\5\ 17 CFR 240.15c3-3.
\6\ 15 U.S.C. 78q-l.
\7\ 7 U.S.C. 7a-1.
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Under the conditional exemptive relief, an Eligible BD-FCM would be
permitted to hold eligible U.S. Treasury securities positions and the
customer assets used to margin, secure, or guarantee such positions
under the cross margin program in a futures account as defined in
Commodity Futures Trading Commission (``CFTC'') Rule 1.3 \8\ from the
period of novation of a trade through settlement of such trade.
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\8\ See 17 CFR 1.3 (defining a ``futures account'' to mean ``an
account that is maintained in accordance with the segregation
requirements of sections 4d(a) and 4d(b) of the [Commodity Exchange]
Act and the rules thereunder.'').
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B. Background
On December 13, 2023, the Commission adopted rules under the
Exchange Act to amend the standards applicable to certain clearing
agencies to enhance risk management practices for central
counterparties in the U.S. Treasury market and facilitate additional
clearing of U.S. Treasury securities.\9\ In the Treasury Clearing
Adopting Release, several commenters discussed facilitating cross-
margining of indirect participants' (i.e., customers' or end users')
transactions in U.S. Treasury securities with those in U.S. Treasury
futures as a method to lower costs of trading and thereby incentivize
additional clearing.\10\ In response to these comments, the Commission
agreed that cross-margining can be beneficial to market
participants.\11\
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\9\ See Standards for Covered Clearing Agencies for U.S.
Treasury Securities and Application of the Broker-Dealer Customer
Protection Rule With Respect to U.S. Treasury Securities, Exchange
Act Release No. 99149 (Dec. 13, 2023), 89 FR 2714 (Jan. 16, 2024)
(``Treasury Clearing Adopting Release'').
\10\ See Treasury Clearing Adopting Release, 89 FR at 2750.
\11\ Id. at 2751.
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Cross-margining arrangements allow joint members of two clearing
organizations to have their initial margin requirements reduced by
accounting for risk offsets between positions held at each clearing
organization. To recognize potential offsets in the risk presented by
related products, some clearing organizations have entered into
proprietary (i.e., noncustomer) cross-margining arrangements with other
clearing organizations that cleared related products.\12\ Since the
adoption of the Treasury Clearing Adopting Release, market participants
have continued to support the implementation of similar cross-margining
arrangements for customer positions in cleared U.S. Treasury securities
and related futures positions at the clearinghouse/DCO level.\13\
Further, other groups also have recommended that the Commission permit
clearinghouse/DCO level cross-margining for customers for certain U.S.
Treasury securities transactions cleared at a clearing agency and
related futures cleared at a DCO, and that the cross-margining occur in
a futures account.\14\
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\12\ See e.g., Order Granting Approval of Proposed Rule Change
to Amend and Restate the Cross-Margining Agreement between FICC and
CME, Exchange Act Release No. 98327 (Sept. 8, 2023) [File No. SR-
FICC-2023-010] (approving amendments to an ongoing proprietary
cross-margining arrangement between the Fixed Income Clearing
Corporation (``FICC'') and the Chicago Mercantile Exchange
(``CME''), a DCO which clears futures related to the U.S. Treasury
securities that FICC clears).
\13\ See Letter from SIFMA, SIFMA's Asset Management Group,
Managed Funds Association, Futures Industry Association (``FIA''),
FIA Principal Traders Group, International Swaps and Derivatives
Association, Alternative Investment Management Association, and The
Institute of International Bankers (Jan. 24, 2025), available at,
e.g., <a href="https://www.sifma.org/wp-content/uploads/2025/01/SIFMA-Extension-Request-US-Treasury-Clearing-Mandate-FINAL-Clean.pdf">https://www.sifma.org/wp-content/uploads/2025/01/SIFMA-Extension-Request-US-Treasury-Clearing-Mandate-FINAL-Clean.pdf</a>
(requesting an extension of the compliance dates in the Treasury
Clearing Adopting Release and stating that additional time is needed
to consider how to resolve critical issues (including cross-
margining of repos and futures) related to the implementation of the
rules).
\14\ See CFTC Global Markets Advisory Committee Advances Key
Recommendations, CFTC Release No. 8860-24 (Feb. 8, 2024), available
at: <a href="https://www.cftc.gov/PressRoom/PressReleases/8860-24">https://www.cftc.gov/PressRoom/PressReleases/8860-24</a>
(recommending making the benefits of cross-margining available to a
broader range of sophisticated customers, including those customers
that will be subject to the clearing requirements under the Treasury
Clearing Adopting Release, as well as to all customers that
voluntarily elect to clear Treasury transactions and will post
margin). See also Treasury Market Practices Group, Consultative
White Paper: Non-Centrally Cleared Bilateral Repo and Indirect
Clearing in the U.S. Treasury Market: Focus on Margining Practices
(Feb. 26, 2025) (recommending that customers, rather than clearing
members, post the margin required by a clearing organization in
respect of cleared U.S. Treasury repurchase transactions).
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C. FICC and CME's Application for Exemptive Relief
FICC and CME currently have in place a proprietary cross-margining
arrangement that allows a broker-dealer that is an Eligible BD-FCM,
acting for itself or for certain non-customer affiliates, or a pair of
affiliated clearing members, to have initial margin requirements for
certain proprietary (i.e., noncustomer) FICC-cleared eligible
securities positions and certain CME-cleared eligible futures positions
calculated in a way that recognizes the risk offsets across those
positions.\15\ Customers who clear positions at CME and FICC through a
joint clearing member are not eligible to have their positions cross-
margined under the current proprietary cross-margin arrangement. To
implement a customer cross-margin program, FICC and CME, on behalf of
their Eligible BD-FCMs, filed an application for exemptive relief from
section 15(c)(3) of the Exchange Act and Rule 15c3-3 thereunder under
section 36 of the Exchange Act on December 11, 2025.\16\ In connection
with the proposed customer cross-margin program, FICC and CME also have
submitted rule filings and exemptive applications with the Commission
and CFTC, as applicable.\17\ The Commission approved FICC's rule filing
by delegated authority on April 15, 2026 and the CFTC issued an
exemptive order on the same date.\18\
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\15\ See Application, infra note 16, at pp. 5-6. Eligible BD-
FCMs participate in the proprietary cross-margin program, and would
participate in the proposed customer cross-margin program, in their
capacity as netting members as defined in FICC's Government
Securities Division Rulebook. See Application at p.1.
\16\ See Notice of an Application of the Fixed Income Clearing
Corporation and Chicago Mercantile Exchange Inc. for an Exemption
Pursuant to Section 36 of the Securities Exchange Act of 1934 in
Connection With the Cross-Margining of U.S. Treasury Securities and
Related Futures, Exchange Act Release No. 104748 (Jan. 30, 2026), 91
FR 4994 (Feb. 3, 2026) (``Notice of an Application''). The
application for exemptive relief (``Application'') is attached as an
Appendix to the Notice of an Application, available at: <a href="https://www.sec.gov/files/rules/other/2026/34-104748.pdf">https://www.sec.gov/files/rules/other/2026/34-104748.pdf</a>.
\17\ See FICC, Notice of Filing of Proposed Rule Change to Amend
and Restate the Second Amended and Restated Cross-Margining
Agreement Between FICC and CME and Amend Related GSD Rules, Exchange
Act Release No. 104485 (Dec. 22, 2025), 90 FR 60791 (Dec. 29, 2025)
[File No. SR-FICC-2025-025]. FICC also filed this proposed rule
change as an Advance Notice [File No. SR-FICC-2025-801] with the
Commission pursuant to Section 806(e)(1) of Title VIII of the Dodd-
Frank Wall Street Reform and Consumer Protection Act entitled the
Payment, Clearing, and Settlement Supervision Act of 2010, 12 U.S.C.
5465(e)(1), and Rule 19b-4(n)(1)(i) under the Exchange Act, 17 CFR
240.19b-4(n)(1)(i). See also CFTC, Proposal to Provide Exemptive
Relief to Facilitate Cross-Margining of Customer Positions Cleared
at Chicago Mercantile Exchange, Inc. and Fixed Income Clearing
Corporation, 90 FR 58525 (Dec. 17, 2025); Notification to the CFTC
Regarding the Third Amended and Restated Cross-Margining Agreement
and Service Level Agreement between CME and FICC, CME Submission No.
25-410. (Sept. 25, 2025).
\18\ Notice of Filing of Partial Amendment No. 2 and Order
Granting Accelerated Approval of Proposed Rule Change, as Modified
by Partial Amendment Nos. 1 and 2, to Amend and Restate the Second
Amended and Restated Cross-Margining Agreement between FICC and CME
and Amend Related GSD Rules; Exchange Act Release No. 105249 (Apr.
15, 2026) [File No. SR-FICC-2025-025] (``FICC Approval Order'');
CFTC, Order Providing Exemptive Relief to Facilitate Cross-Margining
of Customer Positions Cleared at CME and FICC (``CFTC Order''). The
CFTC Order and FICC Approval Order published elsewhere in this issue
of the Federal Register. See also Notice of Filing of Partial
Amendment No. 2 and Notice of No Objection to Advance Notice, as
Modified by Partial Amendment Nos. 1 and 2, to Amend and Restate the
Second Amended and Restated Cross-Margining Agreement between FICC
and CME and Amend Related GSD Rules; Exchange Act Release No. 105197
(Apr. 10, 2026); 91 FR 19221 (Apr. 14, 2026) [File No. SR-FICC-2025-
801].
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[[Page 21037]]
Rule 15c3-3 under the Exchange Act,\19\ the broker-dealer customer
protection rule, requires broker-dealers that hold customer cash and
securities to treat these assets in a manner that facilitates their
prompt return to the customers if the broker-dealer fails financially.
The goal of Rule 15c3-3 is to place a broker-dealer in a position where
it is able to wind down in an orderly self-liquidation without the need
of financial assistance provided by the Securities Investor Protection
Corporation (``SIPC'') through a formal proceeding under the Securities
Investor Protection Act of 1970 (``SIPA''), or through proceedings
under subchapter III of Chapter 7 of the U.S. Bankruptcy Code (i.e.,
the stockbroker liquidation provisions).\20\
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\19\ Section 15(c)(3)(A) of the Exchange Act provides, in
pertinent part, that no broker-dealer shall make use of the mails or
any means or instrumentality of interstate commerce to effect any
transaction in, or to induce or attempt to induce the purchase or
sale of, any security (with exceptions for certain securities) in
contravention of such rules and regulations as the Commission shall
prescribe as necessary or appropriate in the public interest or for
the protection of investors to provide safeguards with respect to
the financial responsibility and related practices of broker-dealers
including, but not limited to, the acceptance of custody and use of
customers' securities and the carrying and use of customers'
deposits or credit balances. 15 U.S.C. 78o(c)(3)(A).
\20\ See 15 U.S.C. 78aaa et. seq.; see also Daily Computation of
Customer and Broker-Dealer Reserve Requirements under the Broker-
Dealer Customer Protection Rule, Exchange Act Release No. 102022
(Dec. 20, 2024), 90 FR 2790, 2791 (Jan. 13, 2025).
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Section 36 of the Exchange Act authorizes the Commission to
conditionally or unconditionally exempt any person, security, or
transaction, or any class or classes of persons, securities, or
transactions, from certain provisions of the Exchange Act or certain
rules or regulations thereunder, by rule, regulation, or order, to the
extent that such exemption is necessary or appropriate in the public
interest, and is consistent with the protection of investors.\21\
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\21\ 15 U.S.C. 78mm(a)(1).
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On January 30, 2026, the Commission issued a Notice of an
Application seeking comment on the Application. The Notice of an
Application was published in the Federal Register on February 3, 2026
to provide interested persons the opportunity to comment.\22\ In the
Notice of an Application, the Commission requested comment on whether
it should consider broadening the exemptive relief requested by FICC
and CME to be available to any clearing agency and DCO and their joint
clearing members with a cross-margining program that meets the
conditions of an exemptive order.\23\ The Commission also requested
comment on how the conditions proposed by FICC and CME in the
Application could be modified if the Commission broadened the exemptive
order.\24\ Further, the Commission requested comment on whether it
should consider requiring FICC or CME to provide Eligible BD-FCMs and
their eligible customers with the ability to select a securities
account as an alternative to a CFTC futures account as a condition to
granting exemptive relief.\25\ The Commission did not receive any
comments on the Notice of an Application.\26\
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\22\ The comment period ended March 5, 2026. See Notice of an
Application, 91 FR at 4997.
\23\ See Notice of an Application, 91 FR at 4997.
\24\ See Notice of an Application, 91 FR at 4997.
\25\ See Notice of an Application, 91 FR at 4996.
\26\ See Notice of an Application [File No. S7-2026-03].
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II. Discussion of Exemptive Relief
Given the above described customer protection requirements under
section 15(c)(3) of the Exchange Act and Rule 15c3-3 thereunder, absent
relief by the Commission, participants would not be permitted to
participate in a program to cross-margin customer positions in U.S.
Treasury securities cleared by a clearing agency and related futures
contracts cleared by a DCO in a futures account.
Cross-margining of cleared U.S. Treasury securities transactions
(subject to the Commission's regulations) and related futures (subject
to CFTC regulations) for purposes of calculating clearing agency and
DCO initial margin requirements can offer many benefits to investors
and the markets, including promoting greater efficiencies in clearing
with respect to offsetting positions and aligning overall margin
requirements more closely with the overall risk of the portfolio a
customer holds through an Eligible BD-FCM. Cross-margining also may
reduce initial margin requirements of a cross-margin customer's
positions and the associated margin costs. In turn, the reduced overall
risk resulting from such risk offsets in cross-margining would limit an
Eligible BD-FCM's exposure to its customers.
At the same time, facilitating cross-margining at the clearing
agency/DCO level for customer cleared U.S. Treasury securities and
related futures requires the Commission to address applicable customer
protection requirements and promote appropriate customer disclosure
with respect to the treatment of margin posted to a clearing agency and
held in a futures account under a customer cross-margin program from
the period of novation of a trade through settlement. In addition, the
Commission also must address certain differences in the requirements of
the Exchange Act and CEA.
Accordingly, after careful consideration of the request before the
Commission, and the relevant statutory provisions, the Commission is
issuing conditional exemptive relief, as discussed below, to facilitate
the cross-margining of cleared U.S. Treasury securities and related
futures for customers of Eligible BD-FCMs subject to the conditions set
out in this order.
A. Scope of Exemptive Relief
This exemptive relief will apply to any Eligible BD-FCM that meets
the conditions of this order. In addition to receiving the Application
from FICC and CME for exemptive relief from section 15(c)(3) of the
Exchange Act and Rule 15c3-3 thereunder to expand their current
proprietary cross-margin program to customers, since the issuance of
the Treasury Clearing Adopting Release, the Commission has approved
applications for two additional U.S. Treasury clearing agencies (in
addition to FICC). As a result, the Commission has approved
applications and proposed rule changes for three U.S. Treasury clearing
agencies (including FICC) to implement certain requirements of the
Treasury Clearing Adopting Release.\27\
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\27\ See CME Securities Clearing, Inc.; Order Granting an
Application for Registration as a Clearing Agency Under Section 17A
of the Securities Exchange Act of 1934, Exchange Act Release No.
104281 (Dec. 1, 2025), 90 FR 55926 (Dec. 4, 2025); ICE Clear Credit
LLC; Order Granting an Application for Registration as a Clearing
Agency Under Section 17A of the Securities Exchange Act of 1934,
Exchange Act Release No. 104762 (Jan. 30, 2026), 91 FR 5528 (Feb. 6,
2026). See also FICC, Order Approving Proposed Rule Change, as
Modified by Partial Amendment No. 1, to Modify the GSD Rules (i)
Regarding the Separate Calculation, Collection and Holding of Margin
for Proprietary Transactions and That for Indirect Participant
Transactions, and (ii) to Address the Conditions of Note H to Rule
15c3-3a, Exchange Act Release No. 101695 (Nov. 21, 2024), 89 FR
93763 (Nov. 27, 2024) [File No. SR-FICC-2024-007].
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Due to the registration of multiple U.S. Treasury clearing agencies
since the adoption of the Treasury Clearing Adopting Release, the
Commission is providing exemptive relief broader than that requested to
include any Eligible BD-FCM meeting the conditions of this order. This
approach also is consistent with other prior Commission approvals for
cross-margining and portfolio margining, including the portfolio
[[Page 21038]]
margining of cleared swaps and security-based swaps that are credit
default swaps in a segregated account established and maintained in
accordance with section 4d(f) of the CEA or a cleared swaps proprietary
account.\28\
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\28\ See Order Granting Conditional Exemptions under the
Securities Exchange Act of 1934 in Connection with the Portfolio
Margining of Cleared Swaps and Security-based Swaps that are Credit
Default Swaps, Exchange Act Release No. 93501 (Nov. 1, 2021), 86 FR
61357 (Nov. 5, 2021) (``2021 CDS Portfolio Margin Order'').
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Broadening the exemptive relief also will allow Eligible BD-FCMs to
participate in, and allow other clearing agencies and DCOs to
implement, customer cross-margin programs without separately having to
apply for exemptive relief from the Commission, for themselves or their
BD-FCM members. This approach will streamline the process of
implementing a customer cross-margin program without undermining the
customer protection because Eligible BD-FCMs must comply with the
conditions of this order. In addition, clearing agencies and DCOs must
file proposed changes with the Commission and CFTC, as applicable, to
amend their rulebooks in order to implement a customer cross-margin
program. Further, Eligible BD-FCMs, clearing agencies and DCOs would
need to obtain any other applicable relief from the CFTC. Finally, the
Commission will continue to coordinate with the CFTC regarding the
implementation of any customer cross-margin programs involving cleared
U.S. Treasury securities and related futures, such as the FICC and CME
customer cross-margin program.\29\
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\29\ See supra note 18.
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Pursuant to this relief, an Eligible BD-FCM will be exempt from
section 15(c)(3) of the Exchange Act and Rule 15c3-3 thereunder solely
with respect to Eligible Customer Positions that are Eligible
Securities Positions \30\ and customer assets used to margin, secure,
or guarantee such positions or which accrue as a result of such trades
or contracts (such customer assets herein referred to as ``Associated
Margin'' for purposes of this order) carried in a futures account, for
and on behalf of customers under an arrangement to cross-margin
Eligible Customer Positions from novation through settlement \31\ (a
``Customer Cross-Margin Program'') administered jointly by a clearing
agency and a DCO, subject to certain conditions. This exemptive relief
will facilitate the clearing of U.S. Treasury securities by recognizing
risk offsets in the calculation of initial margin requirements at the
clearing agency for positions in U.S. Treasury securities and at a DCO
for positions in related futures contracts.
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\30\ The term ``Eligible Customer Positions'' for purposes of
this order means positions held for customers that are: (1) U.S.
Treasury securities cleared through a clearing agency that clears,
settles, and novates transactions in U.S. Treasury securities, and/
or (2) related futures contracts cleared by a DCO. Eligible Customer
Positions cleared through a clearing agency are referred to herein
as ``Eligible Securities Positions'' and those cleared at a DCO are
referred to herein as ``Eligible Futures Positions.'' The term
``Eligible Customer Positions'' is designed to ensure that eligible
positions in the customer cross-margin program are limited to
certain U.S. Treasury securities cleared through a clearing agency
and related futures cleared through a DCO. In addition, because
Eligible Securities Positions are limited to certain Treasury
security positions that have been novated to a clearing agency,
neither a securities transaction that has not been novated to the
clearing agency, securities delivered under a novated Treasury
securities transaction that has settled, nor cash proceeds of such a
transaction would constitute Eligible Securities Positions subject
to this order.
\31\ More specifically, Eligible Securities Positions and
Associated Margin would only be maintained in such futures account
while they are being cleared by the clearing agency. Once an
Eligible Securities Position becomes subject to final settlement,
the Eligible Securities Position and the Associated Margin received
in connection with such settlement (and any returned margin for the
Eligible Securities Position from the clearing agency) would once
again be subject to Rule 15c3-3 under the Exchange Act and any such
other requirements as generally apply to Associated Margin.
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The following discussion describes conditions of the order. As
discussed further below, conditions that were specifically tailored to
FICC and CME in the Application have been broadened so that they will
apply to any Eligible BD-FCM that complies with the conditions of this
order.\32\
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\32\ For example, the FICC and CME proposed conditions to
require the same margin methodology and eligible positions as
permitted in the proprietary cross-margin program have been
generalized in this order. See Application.
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B. Discussion of Conditions
The first condition requires that all Eligible Securities Positions
and Associated Margin under a Customer Cross-Margin Program shall be
carried by an Eligible BD-FCM in a futures account as defined in CFTC
Rule 1.3 for and on behalf of the cross-margining customers and shall
be deemed to have been received by the Eligible BD-FCM and be accounted
for and treated and dealt with as belonging to the cross-margining
customers of the Eligible BD-FCM consistent with section 4d(a)(2) of
the CEA and the CFTC's regulations thereunder. By requiring that
Eligible Securities Positions and Associated Margin be carried in a
futures account, this condition is designed to limit customer
eligibility to participate in an Eligible BD-FCM's Customer Cross-
Margin Program to customers that are eligible for the full protections
of the CFTC's Part 190 bankruptcy distribution rules in the event of an
Eligible BD-FCM insolvency.\33\ The Commission modified this condition
from the proposed condition in the Application to add references to
CFTC Rule 1.3 and CFTC regulations to further clarify that Eligible
Securities Positions and Associated Margin would need to be held in a
futures account that meets the definition of that term under CFTC
regulations. Finally, requiring that Eligible Securities Positions and
Associated Margin be carried in a futures account also will limit
participants in a Customer Cross-Margin Program to futures customers
that have Eligible Futures Positions and Eligible Securities Positions.
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\33\ See 17 CFR 1.3 (defining ``futures customer''); see also 17
CFR 190.01 (defining ``public customer'').
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The second condition requires the Eligible BD-FCM and its eligible
customer both agree in writing to participate in the Customer Cross-
Margin Program in order to apply cross-margining to the Eligible
Customer Positions. This condition is designed to ensure that
participation in a Customer Cross-Margin Program is voluntary and at
the election of both the eligible customer and Eligible BD-FCM so that
cross-margining is not applied to Eligible Customer Positions without
both the consent of the eligible customer and the approval of the
Eligible BD-FCM. The Commission has modified this condition from the
Application to require that the condition be in writing. Although an
Eligible BD-FCM and its customer will typically satisfy this condition
by executing a written customer agreement, the inclusion of the
requirement that the agreement be in writing is designed to clearly
delineate each party's obligations. This requirement also will provide
documentation of the agreement and will aid an Eligible BD-FCM in
demonstrating compliance with the condition.
The third condition requires that the Eligible BD-FCM must enter
into a written non-conforming subordination agreement \34\ with each
eligible customer prior to the customer's participation in cross-
margining under the Customer Cross-Margin Program, pursuant to which
the customer must specifically agree and acknowledge that: (i) the
customer's Eligible Securities Positions and Associated Margin will not
receive customer treatment under
[[Page 21039]]
the Exchange Act or SIPA or be treated as ``customer property'' as
defined in 11 U.S.C. 741 in a liquidation of the Eligible BD-FCM; (ii)
such Eligible Securities Positions and Associated Margin will be
subject to any applicable protections under Subchapter IV of Chapter 7
of Title 11 of the United States Code and rules and regulations
thereunder, and (iii) claims to ``customer property'' as defined in
SIPA or 11 U.S.C. 741 against the Eligible BD-FCM with respect to its
Eligible Securities Positions and Associated Margin held at the
clearing agency will be subordinated to the claims of all other
customers, as the term ``customer'' is defined in SIPA or 11 U.S.C.
741.
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\34\ A non-conforming subordination agreement generally would
not meet all the requirements of Appendix D to Rule 15c3-1
(Satisfactory Subordination Agreements). 17 CFR 240.15c3-1d.
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This condition is designed to assure that customers participating
in the Customer Cross- Margin Program would, in the event of an
Eligible BD-FCM's insolvency, be subject to subchapter IV (commodity
broker liquidation) of Chapter 7 of the U.S. Bankruptcy Code, and the
CFTC's Part 190 Regulations thereunder. This condition would thereby
provide clarity for these customers to benefit from the protections
applicable under CFTC rules, the CEA and U.S. Bankruptcy Code for
assets held in a futures account. Assets held in a futures account
would be afforded the protections of the rules of the CFTC governing
the treatment of customer margin held by an Eligible BD-FCM as well as
the protections of the CEA and commodity broker liquidation provisions.
Together with the disclosure condition discussed below, this condition
should also help to ensure that eligible customers understand at the
outset which customer protections would apply with respect to Eligible
Securities Positions and Associated Margin held in a futures
account.\35\
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\35\ The conditions for the non-conforming subordination
agreement and the disclosure requirements below are consistent with
the non-conforming subordination agreements and disclosure
requirements in the 2021 CDS Portfolio Margining Order. See 2021 CDS
Portfolio Margin Order.
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The fourth condition requires that the Eligible BD-FCM must furnish
to each eligible customer prior to the customer's participation in
cross-margining under the Customer Cross-Margin Program, a disclosure
document containing: (i) a statement indicating that the customer's
Eligible Securities Position and Associated Margin will be held in a
futures account, and that the protections under Subchapter IV of
Chapter 7 of Title 11 of the United States Code and the rules and
regulations thereunder will apply to such money, securities, and
property while held in the futures account; and (ii) a statement that
the broker-dealer segregation requirements of section 15(c)(3) of the
Exchange Act and the rules thereunder, and any customer protections
under SIPA and the stockbroker liquidation provisions, will not apply
to such Eligible Securities Positions and Associated Margin under the
Customer Cross-Margin Program while held in the futures account.
This condition is designed to provide customers, prior to the
customer's participation in cross-margining under the Customer Cross-
Margin Program, with important disclosures regarding the legal
framework that will govern their transactions in U.S. Treasury
securities from novation of a trade to a clearing agency through
settlement. As discussed above, the disclosure requirements are
essential to highlight to customers who agree to participate in the
Customer Cross-Margin Program that the futures account that will hold
their Eligible Securities Positions and Associated Margin will be
governed by the segregation requirements under a regime with different
protections (i.e., the Bankruptcy Code), and that any protections under
SIPA will not be available to them while the Eligible Securities
Positions and Associated Margin are held in the futures account.
Finally, the Commission has modified the language from the proposed
condition in the Application to require that the disclosure document be
provided to the customer prior to the customer's participation in the
Customer Cross-Margin Program, and to emphasize in the disclosures what
protections will and will not apply to Eligible Securities Positions
and Associated Margin ``while held in a futures account.'' This
modification will align the timing of the disclosure with the language
in the third condition regarding the non-conforming subordination
agreement, and ensure that the Eligible BD-FCM provides customers with
the required disclosures before customers have any Eligible Securities
Position and Associated Margin placed in a futures account.
The fifth condition requires that each clearing agency and DCO must
calculate initial margin requirements for Eligible Customer Positions
on a gross basis (i.e., customer-by-customer) \36\ using the same
margin reduction methodology. The determination of initial margin on a
gross basis is intended to ensure that only Eligible Customer Positions
within each individual cross-margin customer's combined portfolio are
offset against one another.
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\36\ This is in contrast to initial margin calculated on a ``net
basis'' where different customer positions are netted together as
one combined portfolio to calculate initial margin requirements.
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The sixth condition requires the Eligible BD-FCM to collect from
each of its cross-margining customers, at a minimum, the aggregate
amount of initial margin required by each clearing agency and DCO in
respect of the cross-margining customer's Eligible Customer Positions.
This condition is designed to help assure that the Eligible BD-FCMs are
requiring minimum margin that measures and accounts for the risk across
a customer's Eligible Customer Positions. This condition also ensures
that the Eligible BD-FCMs hold sufficient customer collateral to cover
the required margin amounts at each clearing agency and DCO.
Furthermore, collecting the aggregate amount of initial margin on a
gross basis would increase the financial resources available to the
clearing agency and DCO in the event of a customer default.
The seventh condition requires that the Eligible BD-FCM be in
compliance with applicable laws and regulations relating to risk
management, capital, and liquidity, and be in compliance with
applicable clearing agency and DCO rules and CFTC requirements
(including segregation and related books and records provisions) for
futures accounts in connection with the Customer Cross-Margin Program.
The purpose of this condition is to help ensure that the exemption
under this order is available only when the applicable regulatory
requirements are appropriately followed.\37\
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\37\ For purposes of this condition, Eligible BD-FCMs would be
exempt from Section 15(c)(3) and Rule 15c3-3 thereunder solely with
respect to any Eligible Securities Positions and Associated Margin
carried in a futures account as defined in CFTC Rule 1.3 under a
Customer Cross-Margin Program meeting all other conditions of this
order.
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The eighth condition states that the clearing agency and DCO must
have amended their rulebooks as may be necessary to implement a
Customer Cross-Margin Program and the conditions of this order.\38\
This condition is intended to ensure that a clearing agency and DCO
have rules in place to implement a Customer Cross-Margin Program that
complies with the conditions of this order. For a clearing agency, the
Commission would need to approve any proposed rule changes regarding,
among other things, eligible
[[Page 21040]]
positions, any applicable cross-margin agreements, margin methodologies
(including margin reduction methodologies), account structure, and the
framework of a Customer Cross-Margin program \39\ through a rule filing
under section 19(b) of the Exchange Act.\40\ Finally, given the
broadening of this order as discussed in section II.A. above, this
condition also will provide market participants with the opportunity
for notice and comment under section 19(b) of the Exchange Act
regarding the proposed framework for any new Customer Cross-Margin
Program that a clearing agency may propose to implement in the future.
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\38\ The Commission modified this condition from the proposed
condition in the Application to require that the clearing agency and
DCO must have amended, rather than ``shall amend,'' their rulebooks,
to express that the rule amendments that satisfy the conditions of
this order must be in place prior to permitting customers to
participate in a Customer Cross-Margin Program.
\39\ For instance, CME and FICC proposed using the same eligible
positions and margin reduction methods for their Customer Cross-
Margin Program as those applied in their existing proprietary cross-
margin program, as amended from time to time, as a proposed
condition in the Application. See Application at p.22. Because the
Commission is broadening the scope of this order as discussed above,
the proposed conditions in the Application related to eligible
positions and the margin reduction methodology specific to FICC are
not included as conditions in this order and instead were approved
by the Commission through a proposed rule change. See supra note 18.
\40\ Under Section 19(b) of the Exchange Act, self-regulatory
organizations (``SROs'') generally must file proposed rule changes
with the Commission for notice, public comment, and Commission
approval, prior to implementation. 15 U.S.C. 78s(b). Section
19(b)(1) of the Exchange Act requires each securities SRO to file
with the SEC ``any proposed rule or any proposed change in, addition
to, or deletion from the rules of . . . [a] self-regulatory
organization.'' 15 U.S.C. 78s(b)(1). The CFTC also has rule filing
requirements under section 5c(c) of the CEA (7 U.S.C. 7a-2(c)) and
part 40 of the CFTC's regulations (17 CFR part 40).
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The ninth condition requires the clearing agency, DCO, and Eligible
BD-FCMs, as applicable, to have obtained any other regulatory relief or
approvals from the Commission or CFTC, as applicable, needed to permit
the eligible customers of an Eligible BD-FCM to participate in a
Customer Cross-Margin Program under the conditions of this order.\41\
The purpose of this condition is to help assure that the exemption from
section 15(c)(3) of the Exchange Act and Rule 15c3-3 thereunder would
apply only in circumstances where the protections of a regulatory
framework under the CEA and the CFTC's rules, or under the Exchange Act
and Commission rules apply and effectively can be applied to the cross-
margining customer of an Eligible BD-FCM.
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\41\ This condition was not in the Application. However, it is
consistent with a previous Commission exemptive order. See 2021 CDS
Portfolio Margin Order.
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For the reasons discussed above, the Commission finds it
appropriate in the public interest and consistent with the protection
of investors to exempt Eligible BD-FCMs from compliance with section
15(c)(3) of the Exchange Act and Rule 15c3-3 thereunder in connection
with a program to cross-margin customer positions in U.S. Treasury
securities cleared by a clearing agency and related futures contracts
cleared by a DCO in a futures account for purposes of recognizing risk
offsets in calculating clearing agency and DCO initial margin
requirements from the period of novation through settlement of a trade.
III. Conclusion
Accordingly, it is hereby ordered, pursuant to section 36(a) of the
Exchange Act, that any broker-dealer that is an Eligible BD-FCM will be
exempt from section 15(c)(3) of the Exchange Act and Rule 15c3-3
thereunder solely with respect to any Eligible Customer Positions that
are Eligible Securities Positions and any Associated Margin carried in
a futures account as defined in CFTC Rule 1.3, for and on behalf of
customers under a Customer Cross-Margin Program subject to the
following conditions:
(1) All Eligible Securities Positions and Associated Margin under a
Customer Cross-Margin Program shall be carried by an Eligible BD-FCM in
a futures account as defined in CFTC Rule 1.3 for and on behalf of the
cross-margining customers and shall be deemed to have been received by
the Eligible BD-FCM and be accounted for and treated and dealt with as
belonging to the cross-margining customers of the Eligible BD-FCM
consistent with section 4d(a)(2) of the CEA and the CFTC's regulations
thereunder.
(2) The Eligible BD-FCM and its eligible customer both agree in
writing to participate in the Customer Cross-Margin Program in order to
apply cross-margining to the Eligible Customer Positions.
(3) The Eligible BD-FCM must enter into a written non-conforming
subordination agreement with each eligible customer prior to the
customer's participation in cross-margining under the Customer Cross-
Margin Program, pursuant to which the customer must specifically agree
and acknowledge that:
(i) The customer's Eligible Securities Positions and Associated
Margin will not receive customer treatment under the Exchange Act or
SIPA or be treated as ``customer property'' as defined in 11 U.S.C. 741
in a liquidation of the Eligible BD-FCM;
(ii) Such Eligible Securities Positions and Associated Margin will
be subject to any applicable protections under Subchapter IV of Chapter
7 of Title 11 of the United States Code and rules and regulations
thereunder; and
(iii) Claims to ``customer property'' as defined in SIPA or 11
U.S.C. 741 against the Eligible BD-FCM with respect to its Eligible
Securities Positions and Associated Margin held at the clearing agency
will be subordinated to the claims of all other customers, as the term
``customer'' is defined in SIPA or 11 U.S.C. 741.
(4) The Eligible BD-FCM must furnish to each eligible customer
prior to the customer's participation in cross-margining under the
Customer Cross-Margin Program, a disclosure document containing:
(i) A statement indicating that the customer's Eligible Securities
Position and Associated Margin will be held in a futures account, and
that the protections under Subchapter IV of Chapter 7 of Title 11 of
the United States Code and the rules and regulations thereunder will
apply with respect to such money, securities, and property while held
in the futures account; and
(ii) A statement that the broker-dealer segregation requirements of
section 15(c)(3) of the Exchange Act and the rules thereunder, and any
customer protections under SIPA and the stockbroker liquidation
provisions, will not apply to such Eligible Securities Positions and
Associated Margin under the Customer Cross-Margin Program while held in
the futures account.
(5) Each clearing agency and DCO must calculate initial margin
requirements for Eligible Customer Positions on a gross basis (i.e.,
customer-by-customer) using the same margin reduction methodology.
(6) The Eligible BD-FCM must collect from each of its cross-
margining customers, at a minimum, the aggregate amount of initial
margin required by each clearing agency and DCO in respect of the
cross-margining customer's Eligible Customer Positions.
(7) The Eligible BD-FCM must be in compliance with applicable laws
and regulations relating to risk management, capital, and liquidity,
and must be in compliance with applicable clearing agency and DCO rules
and CFTC requirements (including segregation and related books and
records provisions) for futures accounts in connection with the
Customer Cross-Margin Program.
(8) The clearing agency and DCO must have amended their rulebooks
as may be necessary to implement a Customer Cross-Margin Program and
the conditions of this order.
(9) The clearing agency, DCO, and each Eligible BD-FCM must have
obtained any other regulatory relief or approvals from the CFTC or
Commission, as applicable, needed to
[[Page 21041]]
permit eligible customers of Eligible BD-FCMs to participate in a
Customer Cross-Margin Program under the conditions of this order.
By the Commission.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2026-07636 Filed 4-17-26; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on April 20, 2026.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.