Member Customer Margin for Cleared OTC Positions

CME Clearing has received a number of requests for guidance as to the applicability to cleared OTC positions of the lower “clearing” or “maintenance” margin level as a customer-exchange member account under Regulation 39.13(g)(8)(ii).

 

Regulation 39.13(g)(8)(ii) requires the collection of initial margin from customers, for non-hedge positions, at a level greater than 100% of the DCO initial margin requirement for each product and swap portfolio.  The CFTC, on September 14, 2012, issued a clarification letter regarding the interpretation of Regulation 39.13(g)(8)(ii).  The clarification letter, generally, provided that the CFTC intended to preserve the historic practice of permitting lower margin levels (clearing/maintenance) for hedge accounts or customer-exchange member accounts. The reasoning provided for this margin treatment was that member customers are “professional traders and are subject to stricter standards and a higher level of review than ordinary public customers.”  

 

Therefore, CME Clearing will extend the clearing/maintenance margin level for cleared OTC positions in the account(s) of CME corporate membership holders (CME Rule 106.J–Equity Member; 106.H–Trading Member Firm; 106. I–Affiliate Member Firm; 106.R–Electronic Corporate Member; 106.S–Family of Funds Member).

 

For more information please contact CME Risk at (312) 648-3888.