FICC’s Sponsored Service allows certain Netting Members to sponsor, as Sponsoring Members, eligible legal entities as Sponsored Members into membership at the Government Securities Division (GSD) of FICC.
A Sponsoring Member’s primary function is to guaranty their Sponsored Member clients’ performance to the CCP. Sponsoring Members also facilitate their Sponsored Member clients’ trading activity and act as processing agents on their behalf for all operational functions, including trade submission and settlement with the CCP.
A Sponsoring Member is permitted to submit to FICC on behalf of its Sponsored Members, transactions in eligible securities for clearing. Sponsoring Members, at their discretion, have the ability to let their clients trade with counterparties other than themselves, providing sponsored members with the same execution flexibility they have in the bi-lateral market today.
Cleared buyside activity through FICC’s Sponsored Service has experienced 90% year-over-year growth, with 36 Sponsoring members now contributing to daily volumes between $1.7T and over $2T.
MEMBERSHIP ELIGIBILITY REQUIREMENTS
Through the expanded Sponsored Service, a broader category of market participants can participate in the service as sponsors, including Dealers, non-U.S. Banks and Prime Brokers
- All applications for Sponsoring Membership are decided on by FICC Management and the FICC Board of Directors.
- Must be a Netting Member that is a Tier One Netting Member (with certain exceptions) to be a Sponsoring Member.
- Financial Responsibility – Applicant must have sufficient financial ability to make anticipated required deposits to the Clearing Fund and Funds-Only Settlement Amounts.
- Operational Capability – Applicant must successfully complete network and connectivity testing at the current FICC standards..
CAPITAL REQUIREMENTS
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The Corporation may impose financial requirements on a Netting Member applying to become a Sponsoring Member that are greater than the financial requirements applicable to it in its capacity as a Netting Member based upon the level of anticipated positions and obligations, the anticipated risk associated with the volume and types of transactions, and the overall financial condition of such applicant.
MARGIN REQUIREMENTS
- Applicants must post an initial Clearing Fund deposit based on the anticipated volume of the Sponsoring Member’s Omnibus Account activity, prior to going live
- Post go-live, a Sponsoring Member must meet a required Clearing Fund amount based on the Sponsoring Member’s Omnibus Account’s unsettled positions and the market risk associated with those positions; this amount is calculated twice daily. Note: For purposes of satisfying the Sponsoring Member’s Clearing Fund requirements, a Sponsoring Member’s activity in its proprietary Netting Member account will be treated separately from the activity in its Omnibus Account.