Products & Services
Fixed Income Services
Membership and its Benefits: A Quick Guide
Fixed Income Clearing CorporationFICC Membership Financial Requirements
This table lays out the minimum financial requirements for firms to become members of Fixed Income Clearing Corporation’s (FICC’s) Government Securities Division (GSD) as well as the central counterparty service1 of its Mortgage-Backed Securities Division. The requirements are generally uniform across both divisions. For additional explanations, see the notes and comments below.
| Entity Type | Standard | GSD | MBSD CCP |
|---|---|---|---|
| Bank or Trust Co. (US) | Equity Capital2 | $100 MM | $100 MM |
| Dealers | Net Worth3 Excess Net /Liquid Capital |
$25 MM $10 MM |
$25 MM $10 MM |
| Non-U.S. Netting Member4 | See FICC rules | To be determined by FICC | To be determined by FICC |
| Futures Commission Merchant (“FCM”) | Net Worth Excess Adjusted Net Capital |
$25 MM $10 MM |
N/A N/A |
| Government Securities Issuers | Equity Capital | No minimum financial standard | $100 MM |
| Insurance Company | No current members—minimum financial standards will be defined as necessary. | ||
| Inter-Dealer Brokers (“IDB”) | Net Worth Excess Net / Liquid Capital |
$25 MM $10 MM |
$25 MM $10 MM |
| Registered Clearing Agency | To be determined by FICC | To be determined by FICC | |
| Registered Investment Companies (“RIC”) | |||
| (Mutual Funds) | Net Assets | $100 MM (proposed) | $100 MM |
| Sponsoring Member5 | Equity Capital6 | $5 Billion | N/A |
| Unregistered Investment Pools7, 8 (“UIP”) | Net Assets | Base Requirement (proposed): $1 Bn Has SEC RIA: $250 MM Has SEC RIA with $1.5 Bn AUM & advises existing FICC clearing participant(s): $100 MM |
Base Requirement: $1 Bn Has SEC RIA: $250 MM Has SEC RIA with $1.5 Bn AUM & advises existing FICC clearing participant(s): $100 MM |
Firms whose financial reporting is based on non-US GAAP
| Financial Reporting Standard | International Financial Reporting Standards (IFRS) or UK GAAP or Canadian GAAP | Non-UK European Union GAAP | Any other type of GAAP |
|---|---|---|---|
| Multiplier | One and one-half times the capital, net worth or net asset requirements set forth on the previous page. | 5 times the capital, net worth or net asset requirements set forth on the previous page. | 7 times the capital, net worth or net asset requirements set forth on the previous page. |
Notes and Explanations
1The MBSD central counterparty service will be operational, pending regulatory approval.
2In addition, capital levels and ratios must meet the applicable minimum levels as required by the regulatory agency that has primary jurisdiction over it.
3The term “Net Worth” means the amount that a company’s assets exceed its liabilities as of a specific date, based on generally accepted accounting principles. Included are liabilities subordinated to the claims of creditors pursuant to a satisfactory subordination agreement, as defined in Appendix D of 17 C.F.R. Section 240.15c3-1d for registered brokers and dealers, in 17 C.F.R. Section 1.17(h) for a Futures Commission Merchant that is not a registered broker-dealer, and in 17 C.F.R. Section 402.2(d) for Government securities brokers and dealers.
4Non-U.S. Membership—If the firm seeking to join FICC is a “Foreign Person,” that is, a company incorporated outside the jurisdiction of the United States, it must satisfy the requirements in each division’s rules for non-U.S. entities. For example, a non-U.S. entity will have a higher minimum financial requirement if its financial statements are not prepared in accordance with U.S. generally accepted accounting principles.
5Sponsored Membership—According to its rules, FICC may permit the establishment of a sponsored membership relationship between a Netting Member that is approved as a Sponsoring Member and one or more entities that are accepted by the FICC as Sponsored Members of that particular Sponsor. To be a sponsored member, a company must: (i) be sponsored into membership by a Sponsoring Member, and (ii) be a registered Investment Company under the Investment Company Act of 1940 (iii) be a “qualified institutional buyer” as defined in Rule 144A under the Securities Act of 1933
6Equity capital—If it has a bank holding company that is registered under the Bank Holding Company Act of 1956, as amended, the bank holding company must also be “well-capitalized” as defined by the applicable regulations of the Board of Governors of the Federal Reserve System.
7Unregistered Investment Pool (e.g., a hedge fund)—The term “Unregistered Investment Pool” (UIP) means an entity that holds a pool of securities and/or other assets and is primarily engaged in the business of investing, reinvesting, or trading securities. It must meet the following criteria:
- (i) it is not registered as an investment company under the Investment Company Act of 1940,
- (ii) it does not register its securities offerings under the Securities Act of 1933, and
- (iii) it has an investment advisor domiciled in the U.S. and registered with the Securities and Exchange Commission under the Investment Advisers Act of 1940, or, if the investment adviser is not registered, the entity has as lock-up period of two (2) years or greater or is subject to another mechanism that will stem the rapid outflow of assets from the Unregistered Investment Pool.
8Management and risk assessment—a UIP (e.g., hedge fund) must obtain at least a “medium” rating resulting from a qualitative assessment performed by FICC, which assesses certain factors including management, capital, strategy and risk profile, internal controls, and any other points FICC deems relevant. FICC performs the assessment of each factor at the level at which the responsibility for such factor falls, e.g., at the Unregistered Investment Pool level, at the level of the Unregistered Investment Pool’s investment advisor or other service provider, or some combination.
* Categories
- (i) A “Category 1” IDB must limit its business to acting exclusively as a broker on behalf of GSD Netting Members
- (ii) A “Category 2” IDB must limit 90% of its business to acting exclusively as a broker on behalf of GSD Netting Members