Federal Register #SR-FICC-2026-802

SEC Notice: FICC Proposal to Establish Guaranty Fund at Government Securities Division

This notice concerns a regulatory proposal by the Securities and Exchange Commission (SEC) regarding the Fixed Income Clearing Corporation (FICC) and its Government Securities Division (GSD): - Government Buyer: - Securities and Exchange Commission (SEC), with the Fixed Income Clearing Corporation (FICC) Government Securities Division (GSD) as the operational entity - OEMs and Vendors: - No commercial OEMs or vendors are involved; FICC is a financial market utility, not a product manufacturer - Products/Services Requested: - Establishment of a Guaranty Fund at FICC's GSD - Funded by cash contributions from Netting Members (excluding Registered Investment Company Netting Members) - Sized to a 'Cover 2 Standard' using daily stress testing to ensure sufficient resources to cover defaults of the two largest members under extreme but plausible conditions - No physical products, IT systems, or commercial services are being procured - Unique or Notable Requirements: - Guaranty Fund contributions are to be bankruptcy remote and separate from existing Clearing Fund deposits - Changes to GSD rules to clarify loss allocation, eliminate fixed minimum margin charges, and introduce a new fine schedule for late payments - The proposal is intended to enhance risk management and liquidity for the GSD, aligning with global best practices for central counterparties - No contract value, product part numbers, or commercial procurement activity is present; this is a regulatory action, not a purchasing opportunity

Description

The Fixed Income Clearing Corporation (FICC) proposes to establish a Guaranty Fund at its Government Securities Division (GSD) to serve as an additional source of prefunded financial resources designed to cover and mutualize the risk of losses from defaulting members under extreme but plausible stress scenarios. The Guaranty Fund would be sized based on daily stress testing to meet a Cover 2 Standard, aligning FICC's risk management with other global central counterparties. The proposal includes changes to the GSD Rules to clarify the treatment of Clearing Fund deposits as initial margin, exclude them from loss mutualization, and enhance liquidity risk management by modifying the use of Clearing Fund deposits. The changes aim to promote robust risk management, safety, soundness, and financial stability in the broader system.

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