Mal Bradford
EMEA Head of Futures Clearing & OTC Clearing Sales
Mal Bradford analyses the impact of a coordinated redesign of Treasury markets margining to assess and collateralise risk.
The U.S. Treasury market is preparing for one of its most important structural upgrades in decades, with mandatory treasury clearing set to come into effect at the end of 2026 for cash transactions. Against this backdrop, the CME and the Fixed Income Clearing Corporation (FICC) are progressing a new cross margining programme – set to launch in Q1’26 – that will allow margin for FICC-cleared Treasury Notes and Bonds with a time to maturity greater than one year to be offset against treasury and interest rate futures cleared on CME when cleared with the same Clearing Member.
CME-FICC cross margining has been available to clearing members for their own “house” accounts since January 2024. What is changing is that clearing members can now extend the same margining benefits to clients. This marks an important milestone for macro funds, relative value strategies, broker-dealers, banks, and non-bank institutions. By bringing cash Treasuries, repo activity, and futures positions into a single margining framework, the CME–FICC model offers a more accurate view of portfolio risk across the U.S. rates market.
Supporting client access to FICC-CME cross margining will be a natural extension to Marex’s existing futures clearing, repo clearing and Risk Based Margin Financing (RBMF) services. As an integrated FCM-Broker Dealer and leading non-bank clearer in the repo and U.S. Treasury basis market, Marex is equipped to provide streamlined access to the FICC-CME cross margining offer. Our firm is already delivering meaningful margin offsets to our Fixed Income clients through our existing RBMF offer, and, because Marex Capital Markets Inc operates without a proprietary back-book, we benefit from lower balance sheet usage and reduced regulatory capital requirements, passing these efficiencies on to clients. Building on this foundation, Marex is positioning itself to offer full FICC-CME cross margining from day one, with implementation targeted for early 2026.
Why CME-FICC Cross Margining Matters for the U.S. Treasury Market
For years, the U.S. Treasury ecosystem has operated across disconnected clearing models. Cash Treasuries are cleared through the FICC, while treasury futures and SOFR futures sit on exchanges with various clearing houses. At present, the vast majority of repos are done on a bilateral or OTC basis with each entity calculating margin independently, often resulting in overstated portfolio risk.
The move towards mandatory treasury clearing and introduction of a cross margining programme will enable firms to reduce counterparty exposure as well as benefit from segregation. It introduces a coordinated risk model designed to deliver significant margin efficiency, capital optimisation, and liquidity benefits for active Treasury and rates traders. In the long term, this coordinated model could inform guidelines for a harmonised margin call methodology for treasury repos, supporting greater standardisation and market resilience.
Key Features of the CME-FICC Cross Margin Model
- Treasury positions, repo and reverse repo, and interest rate futures consolidated into a single risk framework
- Joint CME-FICC risk committee determining offset percentages
- Combined portfolio margining applied across both clearing houses
- Lower initial margin requirements for correlated long and short exposures
- Better alignment between Treasury financing activity and futures hedging strategies
This is a long-anticipated improvement that better reflects how fixed income portfolios are constructed and hedged.
The Benefits for Market Participants
1. Significant Capital and Margin Efficiency
Cross margining reduces initial margin requirements by recognising the natural offset between cash Treasuries, repo exposures, and interest rate futures. This allows firms to:
- recapture capital tied up in margin
- reduce internal liquidity buffers
- improve return on assets under SA CCR and Basel III
For hedge funds and non-bank liquidity providers, this is a direct boost to trading capacity.
2. Lower Liquidity and Funding Costs
The improvements in liquidity and funding dynamics flow naturally from the capital efficiencies above. With less margin tied up and a more balanced view of risk, firms experience fewer large swings in daily margin requirements and a more stable collateral profile. This leads to steadier intraday liquidity usage and lower overall funding volatility.
These improvements are particularly meaningful for basis traders and macro strategies that move frequently across the curve.
3. Better Risk Alignment Across Treasury Markets
Cash Treasuries, repo financing, and Treasury futures are economically linked. The industry has long called for a risk model that recognises the correlation between these exposures. The CME-FICC framework brings the clearing ecosystem in line with how risk is managed in practice.
Who Stands to Benefit Most from CME FICC Cross Margining
- Macro hedge funds and systematic macro strategies
- Relative value funds running basis and curve positioning
- Principal trading firms active in repo and futures
- Banks and broker dealers clearing both fixed income and futures
- Non-bank institutions looking to reduce balance sheet pressure from Basel III and SA CCR
- These firms often hold offsetting exposures across FICC and CME, making them ideal candidates for meaningful margin savings.
Marex: Ready on Day One
While many institutions face long internal build requirements, Marex is prepared to support CME FICC cross margining for its clients as soon as it launches.
“The alignment of cash Treasuries, repo, and futures within a single risk framework is a long-awaited development for rates markets. Marex is uniquely positioned to deliver these benefits immediately thanks to our scalable clearing infrastructure and our long track record supporting sophisticated fixed income strategies.” – Steven Hood, Head of Clearing, Americas
How Marex can help you access these savings
- Open Securities and FCM clearing accounts
- All required legal and operational documentation prepared in advance of the proposed go-live date
- Direct modelling of expected margin offsets and capital savings
- Streamlined onboarding across sales, risk, onboarding, service, and technology
- Flexible account structures built for multi-product trading
- Hands on guidance from experienced clearing leadership
Marex’s agility and focus allow clients to benefit from cross margining faster than with many of our competitors.
A New Era for U.S. Treasury and Futures Markets
CME-FICC cross margining is not only a technical enhancement to post trade processes, but a transformative redesign of how Treasury markets assess and collateralise risk. By reducing unnecessary capital drag and aligning futures and cash markets under a single risk framework, it introduces greater efficiency and flexibility at a time when it is needed most, paving the way for a more standardised risk framework for the market ahead of mandatory Treasury clearing in 2027.
Firms that prepare early will benefit most. Marex stands ready to help clients seize the opportunity.
