The Depository Trust & Clearing Corporation (DTCC) has updated its Value at Risk (VaR) calculator to include cross-margining and repo transaction functionalities, aimed at improving firms’ risk management capabilities ahead of expanded U.S. Treasury clearing requirements expected in 2025 and 2026. These enhancements, introduced through the Fixed Income Clearing Corporation’s (FICC) Government Securities Division (GSD), offer users more nuanced tools for evaluating margin requirements and cross-margining benefits.
The enhanced calculator allows users to gauge potential cross-margin reductions at FICC based on sample portfolios that include both GSD cash positions and CME Group futures. According to Tim Hulse, Managing Director of Financial Risk & Governance at DTCC, these updates are part of a broader effort to “support greater transparency for market participants,” aligning with DTCC’s focus on enhancing understanding and management of margin obligations in a rapidly evolving market.
This development comes as FICC’s GSD experiences record volumes, clearing an average of $8.8 trillion daily as of October 2024. The new capabilities are seen as a valuable tool for firms navigating this high-volume environment, allowing for optimized capital efficiency through consolidated margin management and reducing potential excess liquidity needs.
The cross-margining functionality, specifically, empowers firms to explore margin savings across combined GSD and futures positions, presenting an opportunity for capital efficiencies that may mitigate the need for liquidation in volatile markets. These tools thus provide market participants with an accessible means to assess and respond to risk and margin requirements, in preparation for the anticipated regulatory changes.
As Laura Klimpel, Managing Director, Head of DTCC’s Fixed Income and Financing Solutions, notes, “FICC continues to evolve with the markets to support industry needs.” This expansion of the VaR calculator underscores DTCC’s commitment to delivering tools that not only bolster transparency but also support firms’ operational readiness for future market and regulatory shifts.
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