FIA, the International Swaps and Derivatives Association and the Securities Industry and Financial Markets Association have published a discussion paper that provides an overview of cross-margining programs developed by clearing organizations and their importance in the context of implementing market reforms to US Treasury securities clearing.
The paper also describes firms' cross-product netting arrangements with customers as a means to effectively reduce risk and their relation to cross-margining programs, and the treatment of cross-product netting arrangements under the current US regulatory capital framework.
The paper proposes potential targeted changes to US regulatory capital rules to more appropriately reflect the economics of, and facilitate firms’ use of, cross-product netting arrangements with customers, particularly for transactions based on US Treasury securities.
"It will be critical for the board of governors of the Federal Reserve System, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency to consider revisions to the US regulatory capital framework that recognize the risk-reducing effects of cross-margining programs," the associations say.
Read the discussion paper.
Read a cover note that summarizes the issue (Economically Efficient Treasury Clearing: Client Cross-Margining and Cross-Product Netting).
