CCP Cross-Margining Arrangements Default Fund Contribtuions Under the US Regulatory Capital Rules

Dated: July 14, 2025

The International Swaps and Derivatives Association, Inc. (“ISDA”), the Futures Industry Association (“FIA”) and the Securities Industry and Financial Markets Association (“SIFMA” and, together with ISDA and FIA, the “Associations”) have prepared this discussion paper to supplement the presentation, dated September 5, 2024 (the “Presentation”), and the discussion paper, dated October 15, 2024 (the “Cross-Product Netting Discussion Paper” and, together with the Presentation, the “Cross-Product Netting Materials”), which were previously provided to the staff of the Board of Governors of the Federal Reserve System (the “Federal Reserve”), the Federal Deposit Insurance Corporation (the “FDIC”) and the Office of the Comptroller of the Currency (the “OCC” and, collectively with the FDIC and the Federal Reserve, the “Agencies”).

The Cross-Product Netting Materials provided an overview of cross-margining arrangements developed by qualifying central counterparties (each, a “QCCP”) and described forms of cross-product netting agreements that banking organizations may enter into with customers, including in the context of implementing market reforms with respect to U.S. Treasury securities clearing. Those market reforms include the anticipated expansion of QCCP cross-margining arrangements for U.S. Treasury securities, U.S. Treasury repurchase (“repo”) transactions and U.S. Treasury futures in light of the U.S. Treasury clearing mandate issued by the U.S. Securities and Exchange Commission (the “SEC”).1 The Cross-Product Netting Materials also proposed potential changes to the U.S. regulatory capital rules to more appropriately reflect banking organization cross-product netting agreements with customers, in particular through (i) treating repo transactions as forward-settling interest rate derivatives and (ii) determining the exposure at
default (“EAD”) of a portfolio of repos and derivative contracts subject to a cross-product netting agreement under the standardized approach for counterparty credit risk (“SA-CCR”).

This discussion paper broadly addresses the current treatment under the U.S. regulatory capital rules of banking organization contributions to a QCCP default fund and proposes potential targeted changes to the U.S. regulatory capital rules applicable to default fund contributions to more appropriately reflect the economics and risk offsets of QCCP cross-margining arrangements. Our proposal would use the expanded SA-CCR methodology described in the Cross-Product Netting Materials.