Notice of Filing of Proposed Rule Change to Establish a Guaranty Fund at the Government Securities Division
Summary
SIFMA 1 and SIFMA AMG 2 provided comments to the U.S. Securities and Exchange Commission (SEC) in response to the proposal (“Proposal”) by Fixed Income Clearing Corporation (“FICC”) to amend the Government Securities Division (“GSD”) Rulebook to establish a guaranty fund designed to cover losses that may arise due to a Member default or a non-default loss event. 3
Excerpt
The proposed “Guaranty Fund would provide an additional source of prefunded financial resources, separate from the Clearing Fund, to serve as GSD’s ‘default fund’ and enable FICC to treat its Member’s Clearing Fund deposits as ‘initial margin,’ excluding the Clearing Fund from loss mutualization and supporting bankruptcy remote treatment for Clearing Fund deposits at GSD.” 4 SIFMA supports FICC’s establishment of the Guaranty Fund because it would create a more risk-based approach to maintaining an appropriate funding level to address potential loss events and also would introduce capital efficiencies for Clearing Members.
I. A Separate FICC Guaranty Fund Is a Positive Development
A FICC Guaranty Fund specifically designed for Clearing Member defaults or other loss events that is separate from the Clearing Fund is a positive development for Clearing Members and the capital markets. As described in the Proposal, FICC’s current Clearing Fund serves multiple purposes, including the initial and ongoing margin obligations of Clearing Members, the loss mutualization function in the event of defaults that exceed the value of a defaulting Clearing Member’s liquidated assets, and as a source of liquidity for FICC in the event of a GSD Netting Member default.
The Guaranty Fund would become FICC’s independent default fund, serving as the mutualized pool from which FICC could draw in certain non-default loss events or in the event of a Clearing Member default exceeding the value of that Member’s Clearing Fund and Guaranty Fund deposits. In addition to shifting FICC’s default fund coverage to a more risk-based system, the Proposal also would align FICC with the loss mutualization approaches of other similarly situated CCPs. 5 Moreover, FICC would size the Guaranty Fund at the “Cover 2 Standard,” which also is consistent with other CCP default funds. Harmonizing the approach to loss mutualization frameworks across CCPs contributes to overall stability.
Importantly, this new approach would allow Clearing Members to treat their contributions to FICC’s Clearing Fund as “bankruptcy remote” because the Proposal would exclude the Clearing Fund from FICC’s reach for the purposes of loss mutualization. 6 Under the Proposal, a non-defaulting Clearing Member would have certainty that their contributions to FICC’s Clearing Fund would not be at risk of satisfying the obligations of a defaulting Member, as that event would be addressed solely via the separate Guaranty Fund. As noted in the Proposal, Clearing Members “are subject to regulatory capital rules (either directly or on a consolidated basis) that require such Members to hold capital against margin they post to a CCP unless such margin is ‘bankruptcy remote’ from the CCP.” Therefore, providing certainty that Clearing Fund deposits are “bankruptcy remote” would enhance capital efficiency, particularly for Clearing Members that are banks. 7
- SIFMA is the leading trade association for broker-dealers, investment banks, and asset managers operating in the U.S. and global capital markets. On behalf of our industry’s nearly one million employees, we advocate for legislation, regulation, and business policy affecting retail and institutional investors, equity and fixed income markets, and related products and services. We serve as an industry coordinating body to promote fair and orderly markets, informed regulatory compliance, and efficient market operations and resiliency. We also provide a forum for industry policy and professional development. With offices in New York and Washington, D.C., SIFMA is the U.S. regional member of the Global Financial Markets Association (GFMA).
- SIFMA AMG brings the asset management community together to provide views on U.S. and global policy and to create industry best practices. SIFMA AMG’s members represent U.S. and global asset management firms whose combined assets under management exceed $45 trillion. The clients of SIFMA AMG member firms include, among others, tens of millions of individual investors, registered investment companies, endowments, public and private pension funds, UCITS and private funds such as hedge funds and private equity funds.
- Release No. 34-106053 (Aug. 6, 2026), 91 FR 51762 (Aug. 11, 2026). Undefined terms in this letter have the same meaning as in the Proposal or in the FICC Government Securities Division Rulebook.
- Id. at 51763.
- 91 FR at 51763, n. 11.
- 91 FR at 51769 (“The foregoing changes would ensure that, in the event of FICC’s insolvency, the Clearing Fund would not form part of FICC’s estate or be available to FICC’s general creditors, and that, instead, the Netting Members who posted the Clearing Fund would have the right to its return.”).
- Id.