Cleared OTC Interest Rate Swaps - Collateral Expansion

Corporate Bonds as Collateral for Cleared Interest Rate Swaps

CME Group currently accepts corporate bonds through a specialized collateral program called IEF4, supported by a partnership with Bank of New York, Brown Brothers Harriman & Co and JPMorgan Chase. The program allows clearing firms to transfer securities into a triparty account controlled by CME Group at either bank as a term pledge to receive margin credit. We are expanding the utilization of IEF4 to meet margin requirements through establishing a list of eligible CUSIPs that will be accepted through the program for the benefit of clearing members and clearing member clients.

Effective March 12, 2012, CME Group will allow corporate bonds to be pledged as initial margin collateral for Cleared OTC Interest Rate Swaps. Previously, we only accepted corporate bonds as collateral for futures. With this expansion, Clearing Members will be able to post up to $5 Billion in select assets, including corporate bonds, with specific limits determined by the needs and margin requirements of their customers. Read this paper from CME Clearing for further details.

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