Enabling customers to cross margin would improve efficiency and liquidity
Washington, D.C. — MFA supports the Fixed Income Clearing Corporation (FICC) proposed rule to expand access to cross-margining in U.S. Treasury markets to customer positions in a comment letter submitted to the Securities and Exchange Commission (SEC) today.
Cross-margining allows market participants to offset risk across related U.S. Treasury positions when posting margin, rather than posting margin separately at different clearinghouses. Today, cross-margining between FICC and the Chicago Mercantile Exchange is available only for proprietary positions of dually registered clearing members. The proposal would extend these efficiencies to customer positions, lowering margin costs and supporting more efficient and liquid Treasury markets.
“Cross-margining strengthens the financial system by aligning margin requirements with actual portfolio risk,” said Jennifer Han, MFA Chief Legal Officer. “The proposal will, by accounting for offsetting positions across products, promote more precise risk management, reduce systemic stress during periods of volatility, and support a more resilient Treasury market.”
The letter urges targeted improvements to ensure cross-margining for customers is transparent, predictable, and operationally reliable. Specifically, MFA recommends that the SEC and FICC:
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Provide greater transparency into margin practices for customer positions.
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Clarify the conditions and process for suspending or terminating cross-margining arrangements and provide ample notice to avoid sudden and disruptive margin calls.
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Promote a viable done-away clearing model so customers can consolidate clearing relationships, reduce fragmentation, and fully realize the benefits of cross-margining.
Read the full letter here.
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About the global alternative asset management industry
The global alternative asset management industry — including hedge funds, private credit funds, and hybrid funds — serves thousands of public and private pension funds, charitable endowments, foundations, and other global institutional investors. The industry provides portfolio diversification and risk-adjusted returns to help meet their funding obligations and return targets throughout the economic cycle.
About MFA
Managed Funds Association (MFA), based in Washington, D.C., New York City, Brussels, and London, represents the global alternative asset management industry. MFA’s mission is to advance the ability of alternative asset managers to raise capital, invest it, and generate returns for their beneficiaries. MFA advocates on behalf of its membership and convenes stakeholders to address global regulatory, operational, and business issues. MFA has more than 180 fund manager members, including traditional hedge funds, private credit funds, and hybrid funds, that employ a diverse set of investment strategies. Member firms help pension plans, university endowments, charitable foundations, and other institutional investors diversify their investments, manage risk, and generate attractive returns throughout the economic cycle.
