CME Clearing accepts short-term UST ETFs as collateral

Rick Steves

“We’ve worked closely with ETF sponsors to ensure that this new collateral both meets our rigorous risk management standards and offers a broader range of collateral choices for clearing members.”

CME Group’s clearing division has further expanded the collateral it accepts and now will permit clearing members to deposit Short-Term U.S. Treasury Exchange Traded Funds (ETFs) to meet initial margin requirements.

The short-term ETFs invest in U.S. Treasury securities with less than one-year to maturity and are portable instruments held at the Depository Trust Company.

The addition of Short-Term U.S. Treasury ETFs to the list of accepted collateral only reinforces CME Clearing’s position in the industry as it accepts the widest range of collateral of any major clearing house.

Short-term UST ETFs increase efficiency for clients

This gives clearing members and their clients greater flexibility and increased efficiency in managing their collateral costs.

In particular, the ETFs pay a dividend, which is more operationally efficient and mitigates the need for clients to re-invest maturity proceeds for individual U.S. Treasury securities.

Suzanne Sprague, Senior Managing Director and Global Head of Clearing & Post-Trade Services at CME Clearing, said: “We are very pleased to provide our market participants with additional capital efficiencies by continuing to expand the types of collateral we accept. We’ve worked closely with ETF sponsors to ensure that this new collateral both meets our rigorous risk management standards and offers a broader range of collateral choices for clearing members.”

Carolyn Weinberg, Global Head of Product for ETF and Index Investments, BlackRock, added: “iShares launched the first four-bond ETFs 20 years ago believing they would modernize fixed income markets by increasing transparency and liquidity while unlocking sophisticated portfolio and trading capabilities for our clients. Margin and collateral are a new use case for bond ETFs like SGOV and SHV, which further demonstrates how they are useful, resilient investment tools that can improve outcomes for individuals and large institutions alike.”

Mike Crinieri, Global Head of ETFs at Goldman Sachs Asset Management, commented: “Treasury ETFs such as the Goldman Sachs Access Treasury 0-1 Year ETF (GBIL) are a useful form of collateral that may benefit clients who have challenges managing the roll of a U.S. Treasury Bill portfolio, or who simply wish to outsource treasury management. We are excited to work with CME Clearing to deliver the operational efficiency of the ETF wrapper for collateral purposes.”

Emily McKinley, Head of Institutional Specialists for Invesco ETFs and Indexed Strategies, stated: “We appreciate that CME Clearing has developed an initiative to create a flexible and efficient funding solution for market participants with initial margin requirements. CME Clearing’s addition of the Invesco Treasury Collateral ETF (CLTL) and other short-duration U.S. Treasury ETFs as eligible collateral expands the available toolset for collateral providers and receivers.”

Kimberly Russell, Vice President and Market Structure Specialist at State Street Global Advisors, added: “This initiative aims to bring flexible and efficient funding solutions for market participants with initial margin requirements and highlights an additional use case for short term treasury ETFs.”

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