CME Clearing Expands Collateral Policy to Accept Short-Term U.S. Treasury ETFs

Rhea-AI Summary

CME Group announced the expansion of its collateral policy to include Short-Term U.S. Treasury Exchange Traded Funds (ETFs) for initial margin requirements. This move enhances flexibility and efficiency for clearing members, allowing them to manage collateral costs more effectively. By accepting a wider range of collateral, CME Clearing aims to provide additional capital efficiencies. The initiative is expected to benefit market participants by simplifying the management of treasury portfolios and improving funding solutions. For more information, visit CME's official site.

Positive

• Expanded collateral options to include Short-Term U.S. Treasury ETFs.
• Improved operational efficiency in managing collateral costs for clearing members.
• Potential to enhance flexibility and capital efficiencies for market participants.

Negative

• None.

CHICAGO, Aug. 2, 2022 /PRNewswire/ -- CME Group, the world's leading derivatives marketplace, today announced that CME Clearing has further expanded the collateral it accepts and now will permit clearing members to deposit Short-Term U.S. Treasury Exchange Traded Funds (ETFs) to meet initial margin requirements.

CME Clearing accepts the widest range of collateral of any major clearing house. The addition of short-term ETFs gives clearing members and their clients greater flexibility and increased efficiency in managing their collateral costs. In particular, the ETFs pay a dividend, which is more operationally efficient and mitigates the need for clients to re-invest maturity proceeds for individual U.S. Treasury securities.

"We are very pleased to provide our market participants with additional capital efficiencies by continuing to expand the types of collateral we accept," said Suzanne Sprague, Senior Managing Director and Global Head of Clearing & Post-Trade Services. "We've worked closely with ETF sponsors to ensure that this new collateral both meets our rigorous risk management standards and offers a broader range of collateral choices for clearing members."

"iShares launched the first four-bond ETFs 20 years ago believing they would modernize fixed income markets by increasing transparency and liquidity while unlocking sophisticated portfolio and trading capabilities for our clients," said Carolyn Weinberg, Global Head of Product for ETF and Index Investments, BlackRock. "Margin and collateral are a new use case for bond ETFs like SGOV and SHV, which further demonstrates how they are useful, resilient investment tools that can improve outcomes for individuals and large institutions alike."  

"Treasury ETFs such as the Goldman Sachs Access Treasury 0-1 Year ETF (GBIL) are a useful form of collateral that may benefit clients who have challenges managing the roll of a U.S. Treasury Bill portfolio, or who simply wish to outsource treasury management," said Mike Crinieri, Global Head of ETFs at Goldman Sachs Asset Management. "We are excited to work with CME Clearing to deliver the operational efficiency of the ETF wrapper for collateral purposes."

"We appreciate that CME Clearing has developed an initiative to create a flexible and efficient funding solution for market participants with initial margin requirements," says Emily McKinley, Head of Institutional Specialists for Invesco ETFs and Indexed Strategies. "CME Clearing's addition of the Invesco Treasury Collateral ETF (CLTL) and other short-duration U.S. Treasury ETFs as eligible collateral expands the available toolset for collateral providers and receivers."

"This initiative aims to bring flexible and efficient funding solutions for market participants with initial margin requirements and highlights an additional use case for short term treasury ETFs," said Kimberly Russell, Vice President and Market Structure Specialist at State Street Global Advisors.

The short-term ETFs invest in U.S. Treasury securities with less than one-year to maturity and are portable instruments held at the Depository Trust Company. More information about this new acceptable collateral is available here.

About CME Group
As the world's leading derivatives marketplace, CME Group (www.cmegroup.com) enables clients to trade futures, options, cash and OTC markets, optimize portfolios, and analyze data – empowering market participants worldwide to efficiently manage risk and capture opportunities. CME Group exchanges offer the widest range of global benchmark products across all major asset classes based on interest rates, equity indexes, foreign exchange, energy, agricultural products and metals.  The company offers futures and options on futures trading through the CME Globex® platform, fixed income trading via BrokerTec and foreign exchange trading on the EBS platform.  In addition, it operates one of the world's leading central counterparty clearing providers, CME Clearing. 

CME Group, the Globe logo, CME, Chicago Mercantile Exchange, Globex, and, E-mini are trademarks of Chicago Mercantile Exchange Inc.  CBOT and Chicago Board of Trade are trademarks of Board of Trade of the City of Chicago, Inc.  NYMEX, New York Mercantile Exchange and ClearPort are trademarks of New York Mercantile Exchange, Inc.  COMEX is a trademark of Commodity Exchange, Inc. BrokerTec and EBS are trademarks of BrokerTec Europe LTD and EBS Group LTD, respectively. Dow Jones, Dow Jones Industrial Average, S&P 500 and S&P are service and/or trademarks of Dow Jones Trademark Holdings LLC, Standard & Poor's Financial Services LLC and S&P/Dow Jones Indices LLC, as the case may be, and have been licensed for use by Chicago Mercantile Exchange Inc.  All other trademarks are the property of their respective owners.  

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SOURCE CME Group

FAQ

What new collateral is CME accepting as of August 2, 2022?

CME is now accepting Short-Term U.S. Treasury Exchange Traded Funds (ETFs) for initial margin requirements.

How does the acceptance of Short-Term U.S. Treasury ETFs benefit CME Clearing clients?

It provides clients with greater flexibility and efficiency in managing their collateral costs.

What is the significance of this change for CME Group's operations?

This change allows for a wider range of collateral, improving capital efficiency and operational management for market participants.

What types of securities do the new Short-Term ETFs invest in?

These ETFs invest in U.S. Treasury securities with less than one-year to maturity.

Who announced the expansion of CME's collateral policy?

The announcement was made by CME Group on August 2, 2022.