This topic describes expected use cases for the CME Treasury Rules-based Offset Engine, RBOE, which is used to build offsetting positions in Fixed Income Clearing Corporation (FICC)/CME Cross-margin Allocation Process. Eligible products for risk offset between CME and FICC will need to be moved into designated position accounts within CME Clearing. This content covers both a manual approach and an automated approach for position transfers via the CME Optimizer software. This content is considered a draft for discussion purposes. This content is supplemental to normal Optimizer release notes.

Please see Optimizer release notes for additional details on release scope.

Anchor
_Toc112403729 _Toc112403729

Background

CME Group and FICC are working together to enhance the capital efficiencies available to our common members (and their affiliates, where applicable) when trading U.S. Treasury Securities and CME interest rate futures that have offsetting risk exposures. For the avoidance of doubt, this content refers to the FICC Cross-margin arrangement within the Background section but subsequently refers to all CME operational workflows as the Treasury Rules-based Offset Engine or RBOE. This can be used interchangably interchangeably with RBOE.

Anchor
_Toc112403730 _Toc112403730

Proposed Methodology

Key Enhancements Planned

• Introduce active management aspect applicable to CME positions; passive management remains for FICC positions.
• Expand the eligibility of interest rate futures products available for cross-margining

Timeline to Delivery:

• Target Production Date: Pending Regulatory Approval

Eligibility:

• Eligibility for the arrangement remains house (proprietary) accounts of CME Clearing Members & FICC GSD Netting Members, however, subject to regulatory analyses and approvals, CME & FICC are supportive of extending this program beyond house accounts as part of a later phase

Anchor
_Toc112403731 _Toc112403731

Glossary of Terms

• Treasury rules-based offset engine (RBOE): term used to define the operational offset process at a high level. Can be used synonymously with CME / FICC offset process.
• Target allocation: the allocation of CME futures selected to offset FICC cash treasuries as defined in Equivalent Position Report. Conversion of treasury cash to CME futures applied via DV01. Represented in FutAllocQty field in the equivalent position report.
• FICC position account: This account is new for the CME/FICC Cross Margin Program and is the account which contains CME eligible interest rate futures positions that will available to offset the FICC treasury cash positions. Clearing firms can move positions into this account by performing transfers in FEC+ (manual or API) or by running the RBOE within the Optimizer software. Firms may also give up or directly execute into this account. All positions margined in this account are subject to 3-day MPOR margin treatment.
• Portfolio Margin (PM) position account: existing trading account containing offsets to cleared IRS positions. Clearing firm, via manual process or Optimizer software, transfers or directly executes into this account to achieve offsets using 5-day MPOR. Not all participants of RBOE offsets participate in this account structure.
• Futures and Options position account: existing trading account capturing all futures and options positions not allocated to a special function trading account per above. Margined via 1-day or 2-day MPOR in SPAN® margin methodology.

Anchor
_Toc112403732 _Toc112403732

Changes to Account Structure

...

• Producer of file: CME
• File location:
  • Secure FTP local: /FXXXFTP/cme/ftp/XXX/Outgoing where (XXX is the firm ID)
  • EREP user interface (please contact support team for entitlement details)
• File availability: daily in conjunction with multiple cycles including ITD, EOD, FINAL

• Production filename convention: "XMFICCPOSN_\[cycle code\].yyyymmdd.\[firm id\].csv

  • For example. the EOD file for August 22, 2022 for test firm 123 would be XMFICCPOSN_EOD.20220822.123.csv
• Test filename convention: same as production with "NR_" prefix
• File Format: Comma-delimited Value (CSV)

Detailed file specification:

...

Here is an operational workflow:

Workflow in depth:

1. Position data shared between FICC and CME (multiple times daily).
2. CME generates reports, including the Equivalent Position Report (XMFICCPOSN)
3. The Equivalent Position Report (XMFICCPOSN) is shared to firm secure FTP directories and picked up by Clearing Firms.
4. Clearing Firm runs internal process comparing target allocation to available allocation and identifies the offset to be achieved.
5. Transfers booked via standard BAU process.

Anchor
_Toc112403738 _Toc112403738

Position Transfer Automation via Optimizer Process

...

...