Self-Regulatory Organizations; Fixed Income Clearing Corporation; 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

<NOTICE> SECURITIES AND EXCHANGE COMMISSION <DEPDOC>[Release No. 34-104485; File No. SR-FICC-2025-025]</DEPDOC> <SUBJECT>Self-Regulatory Organizations; Fixed Income Clearing Corporation; 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</SUBJECT> <DATE>December 22, 2025.</DATE> Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Exchange Act”)  <SU>1</SU> <FTREF/> and Rule 19b-4 thereunder, <SU>2</SU> <FTREF/> notice is hereby given that on December 12, 2025, Fixed Income Clearing Corporation (“FICC”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II and III below, which Items have been prepared by the clearing agency. <SU>3</SU> <FTREF/> On December 19, 2025, FICC filed Partial Amendment No. 1 to the proposed rule change to make certain changes to the narrative description of the filing and exhibits provided by FICC. <SU>4</SU> <FTREF/> The Commission is publishing this notice to solicit comments on the proposed rule change, as modified by Partial Amendment No. 1 (hereafter “the proposed rule change”), from interested persons. <FTNT> <SU>1</SU>  15 U.S.C. 78s(b)(1). </FTNT> <FTNT> <SU>2</SU>  17 CFR 240.19b-4. </FTNT> <FTNT> <SU>3</SU>  On December 12, 2025, FICC filed this proposed rule change as an advance notice (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). A copy of the advance notice is <E T="03">available at www.dtcc.com/legal/sec-rule-filings.</E> </FTNT> <FTNT> <SU>4</SU>  Partial Amendment No. 1 makes clarifications and corrections to the narrative description of the proposed rule change and Exhibit 5A of the filing. Specifically, the Amendment corrects the narrative description of a proposed change to the GSD Rules to accurately reflect the change, as it appears in Exhibit 5A. The Amendment also modifies Exhibit to correct a typographical error and mismarked rule text as compared to the currently effective GSD Rules. These clarifications and corrections have been incorporated, as appropriate, into the description of the proposed rule change in Item II below. </FTNT> <HD SOURCE="HD1">I. Clearing Agency's Statement of the Terms of Substance of the Proposed Rule Change</HD> FICC is proposing a rule change related to its cross-margining arrangement (the “Cross-Margining Arrangement”) with the Chicago Mercantile Exchange Inc. (“CME,” and collectively with FICC, the “Clearing Organizations” or “Parties”). The proposed rule change consists of (i) a proposed Third Amended and Restated Cross-Margining Agreement (the “Third A&R Agreement”) between FICC and CME, which would replace the Second Amended and Restated Cross-Margining Agreement between the Parties (the “Second A&R Agreement”) in its entirety and would be incorporated into the FICC Government Securities Division (“GSD”) Rulebook (“GSD Rules”), and (ii) a number of related rule changes to the GSD Rules. Together, the proposed changes would extend the availability of the Cross-Margining Arrangement to positions cleared and carried for customers by a dually registered broker-dealer (“BD”) and futures commission merchant (“FCM”) that is a common member of FICC and CME (an “Eligible BD-FCM”). <SU>5</SU> <FTREF/> <FTNT> <SU>5</SU>  The Commission recently approved FICC's proposed rule change to enter into the Second Amended and Restated Cross-Margining Agreement between FICC and CME. <E T="03">See</E> Self-Regulatory Organizations; Fixed Income Clearing Corporation; Order Approving Proposed Rule Change to Amend and Restate the Cross-Margining Agreement between FICC and CME, 90 FR 22538 (May 28, 2025). The Second A&R Agreement has thus been incorporated in the GSD Rules <E T="03">available at www.dtcc.com/legal/rules-and-procedures.</E> Unless otherwise specified, capitalized terms not defined herein shall have the meanings ascribed to them in the GSD Rules. </FTNT> <HD SOURCE="HD1">II. Clearing Agency's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change</HD> In its filing with the Commission, the clearing agency included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The clearing agency has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. <HD SOURCE="HD2">(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change</HD> <HD SOURCE="HD3">1. Purpose</HD> Currently, the Cross-Margining Arrangement allows FICC and CME to recognize for margin purposes the offsetting risk of certain positions in futures on U.S. Treasury securities and other interest rate futures and Treasury market transactions (“Eligible Positions”) maintained by a member of both Clearing Organizations (a “Joint Clearing Member”) for itself or certain eligible affiliates (an “Eligible Affiliate”), or by affiliated members of CME and FICC (each, a “Cross-Margining Affiliate,” and each Joint Clearing Member and each Cross-Margining Affiliate, a “Cross-Margining Participant”), at the two Clearing Organizations in circumstances when the Clearing Organizations can look to all of those positions (and all associated margin) for performance of the Joint Clearing Member's or a pair of Cross-Margining Affiliates' obligations (the “Proprietary Cross-Margining Arrangement”). In particular, the Proprietary Cross-Margining Arrangement allows the Clearing Organizations to consider the net risk of a Joint Clearing Member's and its Eligible Affiliates' Eligible Positions or a pair of Cross-Margining Affiliates' Eligible Positions at FICC and CME when setting margin requirements for such positions. <SU>6</SU> <FTREF/> Any resulting margin reductions create capital efficiencies for the Cross-Margining Participants and their Eligible Affiliates and incentivize them to maintain or carry portfolios that present lower overall risk. <FTNT> <SU>6</SU>   <E T="03">See</E> Section 4 of the Second A&R Agreement, <E T="03">supra</E> note 4. </FTNT> FICC and CME have submitted to the Commission and the Commodity Futures Trading Commission (the “CFTC”) petitions for exemptive relief from certain provisions of the Commodity Exchange Act (“CEA”) and Exchange Act that would enable FICC and CME to make cross-margining available to customers (other than an Eligible Affiliate) of an Eligible BD-FCM (“Cross-Margining Customers”). <SU>7</SU> <FTREF/> The proposed rule changes aim to set forth a customer cross-margining arrangement that is consistent with the descriptions in the Petitions and the requirements of the Proposed Orders (the “Customer Cross-Margining Arrangement”). The Customer Cross-Margining Arrangement would allow Cross-Margining Customers to benefit from the margin reductions that are currently only available to Cross-Margining Participants and their Eligible Affiliates under the Proprietary Cross-Margining Arrangement. As a result, it would facilitate access to clearing for indirect participants, promote the maintenance of more balanced portfolios that present lower risk, and enhance liquidity in, and otherwise promote the resilience and robustness of, the Treasury market. <FTNT> <SU>7</SU>   <E T="03">See</E> Letter from the Fixed Income Clearing Corporation and Chicago Mercantile Exchange Inc. to Vanessa Countryman dated as of December 11, 2025 and filed as Confidential Exhibit 3B (the “ <E T="03">SEC Petition”</E> ) and Letter from the Fixed Income Clearing Corporation and Chicago Mercantile Exchange Inc. to Christopher J. Kirkpatrick dated as of May 14, 2025 and filed as Confidential Exhibit 3C (the “ <E T="03">CFTC Petition”,</E> and collective with the <E T="03">SEC Petition,</E> the “ <E T="03">Petitions”,</E> and the proposed Commission and CFTC orders as described in the Petitions, the “ <E T="03">Proposed Orders”</E> ). </FTNT> The Third A&R Agreement would effectuate the Customer Cross-Margining Arrangement via the following features: • <E T="03">Eligibility Criteria and Participation Requirements.</E> The Third A&R Agreement would set out the eligibility criteria for a Joint Clearing Member and its Cross-Margining Customer to participate in the Customer Cross-Margining Arrangement, as well as the requirements that would apply to such a Joint Clearing Member and its Cross-Margining Customer. These include the requirements that: ○ A Joint Clearing Member be an Eligible BD-FCM; ○ Each Cross-Margining Customer be a “futures customer” within the meaning of CFTC Regulation 1.3 and a “Sponsored Member” or “Executing Firm Customer” as defined under the GSD Rules; ○ The Joint Clearing Member enter into a participant agreement with the Clearing Organizations; and ○ The Joint Clearing Member enter into an agreement with each Cross-Margining Customer containing certain terms, including that the Cross-Margining Customer agrees to subordinate its claims under the Securities Investor Protection Act of 1970 (“SIPA”) and Subchapter III of Chapter 7 of the U.S. Bankruptcy Code in relation to its cross-margined positions and associated margin (the “Subordination Agreement”). As discussed in greater detail below, these criteria and requirements for participation are designed to ensure that each participating Cross-Margining Customer and its Joint Clearing Member satisfy certain conditions set ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 124k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━