CME Group, the world’s leading derivatives marketplace, today announced that CME Clearing 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.

CME Clearing accepts the widest range of collateral of any major clearing house. The addition of short-term ETFs 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.

CME Clearing is expanding its collateral policy to accept Short-Term U.S. Treasury ETFs to meet initial margin requirements – making it more flexible and efficient for clearing members and their clients to manage collateral costs. Learn more here: https://t.co/HP3zBD1DK7.

— CME Group (@CMEGroup) August 2, 2022

“We are very pleased to provide our market participants with additional capital efficiencies by continuing to expand the types of collateral we accept,” said  Suzanne Sprague, Senior Managing Director and Global Head of Clearing & Post-Trade Services. “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.”

“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,” said  Carolyn Weinberg, Global Head of Product for ETF and Index Investments, BlackRock. “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.”  

“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,” said  Mike Crinieri, Global Head of ETFs at Goldman Sachs Asset Management. “We are excited to work with CME Clearing to deliver the operational efficiency of the ETF wrapper for collateral purposes.”

“We appreciate that CME Clearing has developed an initiative to create a flexible and efficient funding solution for market participants with initial margin requirements,” says  Emily McKinley, Head of Institutional Specialists for Invesco ETFs and Indexed Strategies. “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.”

“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,” said  Kimberly Russell, Vice President and Market Structure Specialist at State Street Global Advisors.

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. More information about this new acceptable collateral is available here.

Source: CME