The Collateral-in-Lieu (CIL) service works via the Sponsored General Collateral (GC) offering of BNY’s Global Collateral Platform.
The Fixed Income Clearing Corp. (FICC) has launched its Collateral-in-Lieu (CIL) service via the Sponsored General Collateral (GC) offering of BNY’s Global Collateral Platform, which introduces a way to clear repo transactions that is margin and capital-efficient, officials say.
BNY Securities Finance and Federated Hermes, Inc. have executed the first repo trade on the new solution, officials add
“The CIL service enhances FICC’s clearing model offerings by delivering significant margin and capital efficiencies and will accelerate the market’s transition to central clearing under the Securities and Exchange Commission’s (SEC’s) U.S. Treasury clearing mandate,” officials say.
“The service maintains the haircut typically posted by dealers to money market funds and other cash investors in triparty while implementing a CCP lien that is applied ‘in lieu’ of both a sponsor guaranty and margin posting to the CCP (in most circumstances),” according to the announcement. “This approach eliminates double-margining for some sponsored members and streamlines operational processes for market participants, leveraging the benefits of triparty.”
Officials say the FICC’s Collateral-in-Lieu:
- Reduces duplicative margin requirements for sponsors and their clients;
- Builds on FICC’s existing sponsored service processes and legal agreements;
- Supports compliance with the SEC’s U.S. Treasury clearing rule while enhancing market liquidity; and
- Leverages BNY’s triparty infrastructure for collateral management and settlement, supporting “done-away” and “done-with” trade execution styles.
The FICC is a subsidiary of the Depository Trust & Clearing Corp. (DTCC), a post-trade infrastructure provider. “DTCC expects increased adoption of the Collateral-in-Lieu service in the coming months as the industry prepares for full implementation of the SEC’s clearing requirements at the end of 2026 and June 2027,” officials say.
